Evening Wrap: ASX 200 hits fresh six month high on inflation surprise, miners rally

The S&P/ASX 200 closed 31 points higher, up 0.43%.

The local sharemarket rallied thanks to hopes that Australian inflation may have peaked, China posted some dire manufacturing and services activity data and all eyes on Powell's speech.

Let's dive in.

Markets

A cooler-than-expected inflation print helped the ASX 200 bounce from session lows of -0.43% to close a fresh six month high.

• Energy led to the upside after Woodside rallied around 1.0% in the final hour of trade

• Real Estate stocks rallied thanks to a dip in bond yields, which was triggered by the easing inflation report

• Materials trailed closely behind despite China posting a further deterioration in manufacturing activity and weakening steel demand

• Defensive sectors like Telcos, Staples and Utilities led to the downside

• 118 of the top 200 advanced (59%)

Economy

China's manufacturing and services purchasing managers index readings both fell deeper into contraction territory in November.

• NBS manufacturing PMI was 48.0 from 49.2 in October and missed analyst expectations of 49.0

• NBS services PMI was 46.7 from 48.7 in October

Australian building approvals fell -6.0% month-on-month in October from -8.1% in September.

• "The result was driven by private sector dwellings excluding houses, which decreased 11.3 per cent. Approvals for private sector houses fell 2.2 per cent." - Daniel Rossi, Director of Construction Statistics at the ABS

Australia's monthly inflation indicator rose 6.9% year-on-year in October from 7.3% in September.

• Well-below analyst expectations of a rise to 7.4%

• The biggest contributors to annual inflation was new dwellings (+20.4%), automotive fuel (+11.8%) and fruit and vegetables (+9.4%)

• "High levels of building construction activity and ongoing shortages of labour and materials contributed to the rise in new dwellings." - Michelle Marquardt, ABS Head of Prices Statistics

Commodities 

“The spectre of China shifting away from zero-COVID policies saw commodities rally across the board. Signs of colder weather also boosted sentiment in energy markets,” said ANZ senior commodity analyst, Daniel Hynes. 

• Newcastle coal futures +2.2% to US$387.40/t

• Iron ore futures -1.2% to US$99.60/t

Latest news

Post market brief

The cooler-than-expected inflation report inspired a massive bounce for the ASX 200 at 11:30 am AEDT. The intraday chart below shows the market ripping higher on the news before seeing a little exhaustion around noon.

XJO chart (Source: TradingView)

Shortly after the inflation report, China reported weaker-than-expected manufacturing and services activity data. The PMIs fell deeper into contraction territory, with the manufacturing PMI being the third lowest since the beginning of the pandemic.

Still, the market didn't seem to care. If anything, the market is behaving as though China is going to reopen.

On the daily chart, the ASX 200 continues to defy gravity, with hardly any pullbacks since late October. Will we finally see some selling come through around the 7,300 level?

S&P/ASX 200 chart (Source: TradingView)

Fed Chair Powell speaks tomorrow at 5:30 am AEDT and investors are going to have their eyes peels for clues about when the Fed will slow the pace of its aggressive interest rate hikes.

"Wall Street has been so desperate for a pivot that it falls apart every time he talks, including his 8-minute speech at J-Hole on Aug 26 (-3.37%), and his pressers on Sep 21 (-1.71%) and Nov 2 (-2.5%)," said Jim Bianco, President of Bianco Research.

Will this time be any different? I'll see you guys tomorrow morning for the rundown.

Major announcements

Mid-to-small caps

• Temple & Webster (TPW) +14.1% said 1H23 revenue was down -14% compared to the prior period but the trajectory started to improve in the second quarter, down just -3%

• Predictive Discovery (PDI) +7.7% reported promising resource drilling and geophysics results at its NE Bankan Gold Project in Guinea

• Talga Group (TLG) 0% said it is advancing discussions with European battery maker Automotive Cells Company regarding supply of graphite anodes. The company said the parties are advanced stages of negotiations and expects to finalise offtake shortly

• Mayne Pharma (MYX) -16.4% July to October 2022 revenues were down -29.5% to $59m as the business cycles elevated sales from a year ago  

Broker updates 

Scans