Evening Wrap: ASX 200 rallies to 1-month high, Fortescue hit by rising costs, US futures higher

The S&P/ASX 200 closed 34 points higher, up 0.5%.

Energy and Materials pushed the local sharemarket higher, Westpac expects the RBA to hike rates by 50 bps in November, US futures are green despite Meta shares sliding -19% in after hours and all eyes on US Q3 GDP data tonight.

Let's dive in.

Markets

The ASX 200 looked at the weak earnings from US heavyweights Microsoft, Alphabet and Facebook-parent Meta and said 'that's not my problem' and rallied.

• Energy led to the upside after the US Energy Information Agency's weekly report showed a sharp decline in gasoline inventories and strong exports, signalling an improvement in global demand

• Materials rallied as a weaker US dollar helped boost commodity prices. The greenback has eased to a three week low, down around -4.4% from recent highs

• Financials lagged after ANZ shares slumped after posting its full year results, which dragged most other bank shares lower

• 69% of the top 200 advanced

Economy

• South Korea third quarter GDP slowed to 0.3% quarter-on-quarter

  • "Household consumption rose 1.9% - a slower pace than the previous quarter (2.9% in 2Q22) mainly due to the increased debt service burden and higher inflation," said ING

  • Looking ahead, "exports are also likely to turn weak again, due to the economic slowdown in major trade partners such as the US, EU, and China and sluggish semiconductor exports. Thus, we maintain our view that the economy will experience a moderate recession early next year."

Commodities 

Most commodity prices were trading +/-1% after posting an outsized move overnight thanks to a weaker US dollar and falling inventories.

• Iron ore futures on China's Dalian Commodity Exchange fell -2.3%

Quick bites

• Westpac on RBA: "The September quarter inflation report has come as such a major surprise that we think the Reserve Bank Board will decide to raise the cash rate by 50bps at the next Board meeting on November 1 ... We do not believe that the Board has backed itself into a corner with its surprise, lower than expected 25bp increase at the October meeting."

Latest news

Post market brief

US futures are green even after Meta shares flop -19.7% in extended hours. Which means the market is looking at the tech heavyweight and saying, 'its a company problem' and not a broader market/economy problem, at least for now.

The ASX 200 powered through the 6,820 level we've been talking about in the past few Evening Wraps but still experienced some selling around session highs.

This move was aided by a pullback for both bond yields and the US dollar, factors that have weighed on recent market performance. We also saw dovish moves from the Bank of Canada and Mexico, which further supports the view that the tightening cycle is slowing down.

Still, this view needs to make it past the main boss: the Fed.

US third quarter GDP growth is due tonight and consensus expects quarter-on-quarter growth of 2.4% whereas the Atlanta Fed's GDPNow model is forecasting 3.1%.

In a bull or 'normal' market, good news sends shares higher. But in a bear market, a GDP beat could see the opposite happen as it might empower a even more hawkish rhetoric from the Fed. If the economy is doing well, then it can surely handle more rate hikes in the battle against inflation.

Remember what happened in early October?

• 30 Sep: S&P 500 hits fresh year-to-date low

• 3-4 Oct: S&P 500 rallies 5.77% in just two days

• 7 Oct: S&P 500 falls -2.8% on better-than-expected jobs report

Just food for thought.

Index charts

S&P/ASX 200: A four day winning streak and push above the 6,820 level. We've seen plenty of 2-4 day winning streaks fizzle rather quickly. The important thing here is, in the event of a pullback, for it to be orderly and filled with panic and aggressive selling. Let's see how this plays out.

XJO chart (Source: TradingView)

Major announcements

Another massive day for announcements.

Large caps (>$1bn market cap)

• Lynas (ASX: LYC) +5.6% 1Q23 revenue fell -44% quarter-on-quarter to $163.8m amid ‘significant operational challenges’. The company continues to forecast ‘very strong demand’ for NdPr and rare earth metals

• Champion Iron (ASX: CIA) +4.8% posted 37% growth in iron ore production in the September quarter and average iron ore prices fell -22.4% to US$107.6 a tonne

• Newcrest (ASX: NCM) +3.2% reaffirmed its annual guidance

• Super Retail Group (ASX: SUL) +2.7% posted 20% like-for-like sales growth in the first 16 weeks of FY23  

• Reece (ASX: REH) +2.2% achieved 28.8% revenue growth in 1Q23

• Sayona Mining (ASX: SYA) +2% noted that its North American Lithium operation is on track for 1Q23 restart with permitting and procurement at 96% completion    

• Syrah (ASX: SYR) +2% said mining operations have resumed at its Balama Graphite Operation after interruptions due to illegal industrial action 

• Corporate Travel (ASX: CTD) +1.7% is targeting 80% revenue recovery in FY23 and expects the year to remain choppy amid supply constraints and Chinese lockdowns

• JB Hi-Fi (ASX: JBH) +0.4% posted 14.6% year-on-year sales growth for JB Hi-FI Australia and 12.3% sales growth for The Good Guys

• Qube (ASX: QUB) +0.4% said its experienced a strong start to FY23, with “continued high volumes and margin improvement across most parts of its business.”

• Fortescue Metals (ASX: FMG) -0.4% reported a 47.5m tonnes of iron ore shipments, up 4% compared to last year and a record for a first quarter. Costs jumped 16% YoY to US$17.69 a tonne and average prices for the quarter were US$87.43 a tonne 

• Insignia (ASX: IFL) -1.6% posted a -1.8% decline in funds under administration to $201.6bn

• ANZ (ASX: ANZ) -3.3% cash profits rose 5% to $6.5bn for the full year ended 30 September 2022

• Core Lithium (ASX: CXO) -5.2% said its term sheet with Tesla expired without an agreement being completed 

Mid-to-small caps

• Weebit Nano (ASX: WBT) +25.5% successfully completed a full technology qualification of its Resistive Random-Access Memory module

• Bigtincan (ASX: BTH) +24.5% posted a 162% increase in 1Q23 cash receipts to $37.7m and expects full year EBITDA to ‘materially exceed’ FY22

• Red5 (ASX: RED) +12.9% produced 26,710 ounces of gold in the September quarter and expects its KOTH project to reach commercial production this quarter

• Nitro Software (ASX: NTO) +7.5% posted 51% growth in annual recurring revenue at 30 September to US$55.2m and reaffirmed its 2022 guidance

• Regis Resources (ASX: RRL) +6.9% reaffirmed its FY23 guidance of 450,000 to 500,000 ounces at an AISC of A$1,525 to A$1,625/oz    

• Gold Resources (ASX: GOR) +5.2% retained its FY22 guidance of 300,000 to 340,000 ounces at A$1,270 to A$1,470/oz

• Deep Yellow (ASX: DYL) +1.8% completed an 18-hole drilling program at its Alligator River Project, identifying further mineralised fault corridors nearby to its current resource

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