Evening Wrap: ASX 200 higher, Oil and gold prices rally on Israel-Hamas war

The S&P/ASX 200 closed 16 points higher, up 0.23%. 

Australian equities finished higher on Monday but off best levels, oil and gold prices rally in response to the surprise Hamas invasion, Qantas shares are under fire following a parliamentary committee review plus a few broker notes of interest.

Let's dive in.

ASX 200 Session Chart

ASX 200 finishes higher but well off best levels (Source: Market Index)

Markets

The ASX 200 extends its winning streak to three but finished below session highs of 0.64%. It was a relatively choppy session as the market juggled mixed signals. The open was relatively upbeat thanks to the strong lead from Wall Street. However, the market then started to digest weaker US futures while safe havens like gold, oil and treasuries opened higher amid a flight to safety and geopolitical concerns following the Hamas attack on Israel.

Economy

No major economic announcements.

Latest news

Israel & Hamas: What does this mean for markets?

ASX-listed stocks in Israel: Weebit Nano (ASX: WBT) is one of few Israel-based companies on the ASX. The news has caused substantial downward pressure on the stock:

• Open: -3.85% to $3.00

• Session low: -11.7% to $2.76

• Close: -8.7% to $2.85

Safe havens: The US Dollar Index is up around 0.2% on Monday and gold is bouncing from extreme oversold levels.

This resulted in broad-based gains for local gold names including Westgold (+7.95%), Evolution Mining (+6.3%), Perseus Mining (+5.2%), Newcrest (+4.7%), Ramelius Resources (+4.1%) and Northern Star (+4.0%).

US Dollar Index daily chart (Source: TradingView)

Gold daily chart (Source: TradingView)

Oil: Jumped as much as 5.4% on fears that the conflict may widen. Will this change already tight oil supply conditions for worse? Let's see how the Saudi-Iran dynamics change in the coming days and weeks.

Energy was the best performing ASX 200 sector on Monday, up 3.0%. The gains were led by names including Karoon Energy (+5.7%), Santos (4.2%), Woodside (+3.1%) and Beach Energy (+3.3%).

WTI crude daily chart (Source: TradingView)

More Pain for Qantas

"Parliamentary committee recommends the Australian government review ways to boost domestic aviation competition, including the potential power to break up airlines to address market abuse," Bloomberg reported at 3:20 pm AEST on Monday.

Other recommendations from the committee included:

• Reinstating the monitoring of airlines

• Inquiry into potential anti-competitive behaviour in the domestic aviation market

• Review of decision not to allow Qatar Airways to operate more flights in and out of Australia

• Consumer protections for significant flight delays, cancellations, lost baggage and devaluation of loyalty programs

• Better airport slot management to ensure unused takeoff and landing slots are made available to more airlines

Qantas (ASX: QAN) was already off to a weak start on Monday as oil prices rallied as much as 5.4% in early trade. The Bloomberg reported saw the stock dip even further to close 3.8% lower to a fresh 14-month low.

Qantas intraday chart (Source: TradingView)

Interesting news and movers

Trading higher

• +12.1% Aeris Resource (AIS) – September quarter production

• +6.9% Auteco Metals (AUT) – SPP to close early (Fri) 

• +3.0% Lake Resources (LKE) – ASX query letter response

Trading lower

• -14.9% Winsome Resource (WR1) – $34m capital raise 

• -14.6% Azure Minerals (AZS) – Metallurgical results from Andover

• -7.2% Magellan (MFG) – Funds under management update (Fri) 

Broker notes

Morgan Stanley on Amcor (AMC)

• Equal-weight with $14.50 target price ($14.25 at 5 Oct)

• “FY24 guidance points to continued headwinds in the 1H with price increases and cost savings to prop up 2H earnings growth.”

• “The downward consensus revisions and a share price near 52- week lows suggests near-term challenges are priced in at these levels.”

• “AMC offers defensive earnings, quality management with a strong track record and a 4% yield.”

Macquarie’s take on Energy stocks:

• Woodside (Neutral): “WDS shares have been pulling back since the Scarborough injunction & the pullback in oil prices - and now look less expensive. However, the market is not yet pricing in delays or capex increases on Scarborough in our view.”

• Santos (Outperform): “Current share price implies negative value for Barossa; we expect that renewed progress on drilling/pipeline/subsea will be taking positively (capex increase and schedule delay is already anticipated).”

• Carnarvon Energy (Underperform): “With STO likely unwilling to take FID on Dorado in the current regulatory environment, CVN will need Keep Calm and Preserve Capital.”

Macquarie on ASX (ASX):

• Outperform with $60.00 target ($56.15 at 5 Oct) 

• “Futures volumes increased at +8.9% vs pcp in 1Q24.”

• “Equities trading volumes remain compressed: 1Q24 ADV -9.4% vs pcp.”

• “ASX currently trades at a ~21.9x 12-month forward P/E, ~23% below the 3-year average of ~28.5x.”

• “ASX provides relative stability against a more difficult macroeconomic outlook; however, the lack of catalysts until the Dec ’23 qtr CHESS announcement remains a concern.”

Scans