Evening Wrap: ASX 200 nails fifth gain as Westpac delivers juicy divvy, buyback

The index enjoyed its fifth straight gain as it closes in on the psychological 7,000 mark. Westpac led gains after investors reacted positively to its FY23 results, while consumer, health, and technology names also prospered.

Let's dive in.

ASX 200 Session Chart

ASX 200 lower and finished near worst levels (Source: Market Index)

Markets

The S&P/ASX 200 (XJO) made it 5 in a row logging a modest but important 19.2 point gain. Our best close in nearly a month was powered by a 2% gain in Westpac Banking Corp (ASX: WBC), which helped the ASX/200 Financials Sector (XFJ) to a more modest 0.4% gain.

The healthcare sector was once again the best performing sector, up 1.5% as a 1.7% gain sector leader CSL (ASX: CSL) led continued bounces in Imugene (ASX: IMU) +8.3%, Neuren Pharmaceuticals (ASX: NEU) +4.3%, and embattled Resmed (ASX: RMD) +3.1%.

Gold miners were also prominent in the gainers list despite softer spot prices in Asia. De Grey Mining (ASX: DEG) rallied 7.4% while Bellevue Gold (ASX: BGL) and Perseus Mining (ASX: PRU) each added 4.7%.

Energy companies fared the worst as thermal coal and crude oil each suffered hefty losses in excess of 5% last week. Whitehaven Coal (ASX: WHC) lost 2%, New Hope Corp (ASX: NHC) lost 1.8%, while Woodside Energy (ASX: WDS) fell 0.8%.

In uranium, the wings of recent high flyers were clipped as Deep Yellow (ASX: DYL) lost 8.7%, Paladin Energy (ASX: PDN) fell 5%, and Boss Energy (ASX: BOE) slipped 4.4%.

Economy

The Melbourne Institute's monthly inflation gauge showed a surprise 0.1% fall in prices in October. Stop wiping your eyes, don't refresh the screen, yes, prices fell a smidge in October. The last time prices fell was in June 2022. The annualised inflation rate according to MI is still a lofty 5.1%, however, but the good news is it's down from September's 5.7% p.a. clip.

A most timely piece of data indeed ahead of what many economists consider to be a locked in 0.25% interest rate hike tomorrow. The RBA meets at 2:30pm AEDT, so if you still have the manual dexterity to do so by then, check in with us for on-the-spot analysis.

Latest news

Westpac strongest in nearly 30 years, CEO

Aussie bank investors are being rewarded for either sticking their heads in the sand on Aussie banks to faithfully collect their juicy dividends, or for their prudent stock picking approach. Tell yourself whichever makes you feel smarter, but if you own Westpac shares, you've got a juicy $1.42 per share fully franked dividend on the way. This was slightly ahead of consensus for a $1.41 divvy, and comes on the back of the company's 26% rise in net profits for the financial year to September 30 of $7.2 billion.

CEO Peter King says "Westpac’s balance sheet is the strongest I’ve seen in my 29 years at the bank". This is probably why he's embarking on a $1.5 billion share buyback. He wasn't concerned about ongoing weak consumer sentiment and rising impairment charges amidst a backdrop of an increasing number of loans under stress.

Operationally, it was a clean sheet, with operating expenses down 1%, net interest margin up 2 basis points, and the bank's CET1 capital ratio rising 0.2% to 12.4%.

Click here for Everything you need to know about Westpac’s FY23 results.

Interesting news and movers

Trading higher

• +10.3% Zip Co (ZIP) - Continuation rally post Block's better than expected results

• +8.3% Imugene (IMU) - Positive early signals from Phase 1 CF33 VAXINIA study update

• +8.2% Iress (IRE) - JP Morgan upgrades the financial markets data company's rating to overweight

Trading lower

• -8.7% Deep Yellow (DYL) - Sector pullback as modest fall in uranium price extends into third session

• -7.7% Talga Group (TLG) - Placement at $1.00 as co. looks to raise $15 million to progress "critical path development activities" at its Vittangi Anode Project

• -6.2% Block Inc (SQ2) - Pullback after Friday's +20% rally

Broker notes

Macquarie Group (ASX: MQG)

• Citi: "we have lowered our FY24 NPAT expectations by ~6%", "1H24 was clearly a difficult environment for asset realisations" versus "stubborn costs". Forecasting earnings is "becoming an increasingly fraught exercise". Target falls to $161 from $175, retains "Neutral" rating

• Morgan Stanley: Macquarie "needs catalysts such as a capital markets recovery or more evidence of structural growth in Infra & Green Energy. These are likely to emerge in FY25E" Target falls to $202 from from $215, retains "Overweight" rating

• Goldman Sachs: "1H24 performance was driven by higher expenses, rather than weaker revenues". "Management's guidance would appear to require a material improvement in the division’s 2H24 cost trajectory to hit management’s Group NPAT expectations" Target falls to $180.80 from $194.99, retains "Neutral" rating

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