Evening Wrap: ASX 200 fades early gains ahead of US jobs report, iron ore prices tumble

The S&P/ASX 200 closed 17 points lower, down -0.25%.

The local sharemarket faded early gains of 0.14%, iron ore prices continue to roll over, September seasonality is going to plan and key US unemployment data tonight.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 4 out of 11 sectors advanced

• Financials led after a selloff on Thursday

• Defensive sectors including Health Care and Staples also green

• Materials underperformed as commodity prices remain under pressure

• Tech also led to the downside

• 58% of the top 200 companies declined

Stocks

• James Hardie (ASX: JHX) +0.1% appointed Mr Aaron Erter as CEO. Erter has more than two decades of experience leading large industrial and consumer businesses. He was previously the CEO of PLZ Corp, an aerosol and liquid products manufacturer in North America 

• Evolution Mining (ASX: EVN) -1.4% appointed Mr Lawrie Conway as CEO, effective 1 January 2023. Conway has been the company’s CFO since 2014

• Strike Energy (ASX: STX) -12.7% successfully raised $30m at 23.5 cents per share, a 14.7% discount to its last close. Proceeds will be used to support gas production at the Walyering gas field and progress the Project Haber fertiliser development

Economy

• South Korea inflation eased to 5.7% year-on-year in August from 6.3% in July

  • A Reuters poll of economists expected a reading of 6.1%

  • Prices fell -0.1% month-on-month

  • Falling oil prices helped lower month-on-month inflation by 0.57 percentage points

  • Still, annual core inflation accelerated to 4.0% in August from 3.9% in July

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange fell -3.6%

  • "China's steel producers are struggling with the most difficult period they've encountered since the central government's tough supply-side reforms of 2016, due to the slower-than-expected recovery in steel demand and mounting pressure from high production costs," Mysteel reported

  • Between January and July, gross profits at 90 key steel mills under the China Iron and Steel association fell -63.4% compared to a year ago

• Brent crude prices up 1.7% to US$93.7 a barrel after a three-day skid where prices fell -12.3%

Scans

Latest news

Post market charts

S&P/ASX 200: Nothing much to see. Market in no man’s land after the steep fall on Thursday and a discouraging fade on Friday.

Source: TradingView, Annotations by Market Index

S&P/ASX 200 Materials: Chart is pretty similar as the ASX 200. Singapore iron ore futures down around -9.4% this week to US$95.3 a tonne and copper was on a five-day losing streak down -8.4%. Chinese lockdowns really adding further insult to injury.

Stocks

Healthcare and Staples holding up: Names like CSL (ASX: CSL), Woolworths (ASX: WOW) and Coles (ASX: COL) continue to be relative outperformers of the market. Though, its worth noting that the two supermarket giants are coming off a massive >10% selloff that occurred during reporting season.

CSL price chart (Source: TradingView, Annotations by Market Index)

Lithium starting to roll over: V-shaped names like Allkem (ASX: AKE) starting to give in but still trading well-above its 20-day and 50-day moving average. Another leading name like Core Lithium (ASX: CXO) pulled into the 20-day. It's tried to hold that key area but rolled over on Friday, down -5.2%.

Allkem price chart (Source: TradingView, Annotations by Market Index)

Uranium doing its thing: The last 12 months has been a never ending cycle of 1) big news about nuclear energy adoption, 2) uranium stocks rally, 3) positive news flow stops and 4) uranium stocks fall. Almost every single uranium stock was red on Friday. Most are still positive following the Japan and India news last Wednesday.

Paladin Energy weekly chart (Source: TradingView)

Food for thought

US jobs report: This week’s jobs report “is unlikely to pause the momentum for the Fed to hike by 75 bps … would most likely need to see a significant fall in CPI … to reconsider 50 bps; perhaps a print in the 6.0% to 6.5% range,” said JP Morgan

More on US jobs: “If slowing the jobs market is a necessary condition to achieve the Fed’s inflation objectives, the Fed is far from declaring mission accomplished. Initial claims have declined for three weeks. The ISM manufacturing sub-index just rose to 54.2, highest since March,” said Renaissance Macro Research

US Q3 GDP: Atlanta Fed GDPNow model estimates for real GDP growth in the third quarter of 2022 to be 2.6%.

Market following the script: The August high into the seasonally weak September is so far going to plan. "Investors know that September is the weakest month of the year for US equities. Going back to 1928, the SPX is up only 45% of the time with an average return of -1.07% in September. However, with this pain often comes opportunity for the bulls given better seasonality in October, November and December," said Bank of America Global Research

Have a good weekend, see yous on Monday.