Evening Wrap: ASX 200 falls, Chinese lockdowns weigh on iron ore miners, US futures lower

The S&P/ASX 200 closed 13 points lower, down -0.18%.

The local sharemarket closed slightly lower after China introduced fresh restrictions in Beijing and Guangzhou, iron ore miners tumbled on lockdown news and a Dow like rotation is taking place.

Let's dive in.

Markets

The ASX 200 closed slightly lower as gains from defensive sectors were offset by declines from tech and resources.

• There's a clear rotation from growth-heavy sectors into defensives like Utilities, Industrials, Staples and Health Care

• Materials led to the downside after China locked down the Baiyuan District in Guangzhou for 5 days from 21-25 November as covid cases continue to climb

• Energy also lower as China's covid situation spooked a fourth consecutive day of declines for oil prices

• 101 of the top 200 (51%) declined

Economy

China kept its benchmark lending rates or loan prime rates unchanged, in-line with expectations.

• The 1-year rate was unchanged at 3.65%

• The 5-year rate was unchanged at 4.30%

Commodities 

"China optimism faded as a stronger USD and hawkish comments from central bankers saw commodity markets give up recent gains last week," said ANZ senior commodity strategist, Daniel Hynes.

• Newcastle coal futures +5.3% to US$337 a tonne

• Copper -0.55% to US$3.6/lb

• Iron ore futures -2.5% to US$91.55 a tonne

Latest news

Post market brief

It was surprising to see the market finish rather unscathed after China ordered a five-day lockdown for the most populous district in Guangzhou, a southern city of almost 19 million people. Iron ore heavyweights BHP, Rio Tinto and Fortescue finished the session down between 2-4%.

We're also seeing heavy selling across commodities like copper and oil. Copper rallied around 15% in just six days earlier this month, its now on a six session skid, down -7.9%. Likewise, oil is down for four straight sessions, giving back -8.9%.

We're seeing a Dow like rotation where defensive and value sectors are holding up, relative to the rest of the market. Again, its surprising to see the market hold up relatively well in the face of more Chinese lockdowns, an ever so hawkish Fed and ongoing recession risks.

Index

S&P/ASX 200: Another uneventful move around this 7,130 level.

XJO chart (Source: TradingView)

S&P/ASX 200 Energy: Index fails to hold the 20-day moving average. Oil market now focused on demand as China enters lockdown. Does the index bounce around these levels (old highs)?

XEJ chart (Source: TradingView)

S&P/ASX 200 Financials: Starting to form a range and lower high.

XFJ chart (Source: TradingView)

S&P/ASX 200 Real Estate: Looking at this long-term trendline.

XRE chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• Liontown Resources (LTR) +3.1% posted an 85-page 2022 ESG report

• Sandfire Resources (SFR) +0.4% successfully raised $147m at $4.30 per share, a 10.2% discount to its last close       

• Life 360 (360) Trading halt shares will resume trading on Monday, 21 November pending a proposed capital raising

• QBE Insurance (QBE) -0.6% trading update notes that year-to-September gross written premium was 12% on the prior period but elevated catastrophe activity sees a potential $100m catastrophe allowance blowout

• Lake Resources (LKE) -0.95% have concluded dispute resolution in the form of contract amendment, Lake will have certain buyback rights if Lilac does not meet agreed testing criteria in a timely manner

• Pro Medicus (PME) -1.7% AGM said its FY23 year-to-date transaction volumes are above pre-covid levels. The second half is expected to be stronger with increase transactions from recent installs  

Mid-to-small caps

• Dreadnought Resources (DRE) +2.1% announced that final assays have continued to confirm thick, high-grade rare earth mineralisation at the Mangaroon Project in WA

• Arafura Rare Earths (ARU) -3.3% was granted access authorities (site road, mine access and borefield access) by the Department of Industry, Tourism and Trade

Broker updates 

Scans