Evening Wrap: ASX 200 rallies to a five month high, resources bounce, US futures flat

The S&P/ASX 200 closed 42 points higher, up 0.59%.

The local sharemarket rallied to a five month high as resources bounced back, Goldman Sachs remains bullish on oil's medium to long-term outlook and Australian consumer confidence inches higher from dire levels.

Let's dive in.

Markets

The ASX 200 rallied to a fresh five month high as Resource sectors bounced back.

• Energy led to the upside after oil reversed a -6.2% decline last night

  • Goldman Sachs downgraded its December quarter oil outlook by US$10 to US$100 a barrel but viewed this dip as an opportunity to "add length on yet another speed bump that will come to pass

• Materials also bounced with heavyweights BHP and Rio Tinto closing around 1.0% higher

• Technology shares trended higher with a notable 5.3% gain from Technology One following a robust full-year result

• Defensive and Discretionary sectors underperformed benchmarks

• 118 of the top 100 advanced (59%)

Economy

Australian consumer confidence rose 1.0% to 81.6 for the week ending 20 November, according to ANZ.

• Consumer confidence levels are still sitting near covid and GFC levels

• "Weekly inflation expectations" fell 0.2 percentage points to 6.3%

• "Current financial conditions" fell 3.6%, falling to its lowest since the start of the pandemic

• "Time to buy a major household item" rebounded 9.2%, after a cumulative decline of 13% over the previous six weeks

• "Critically, though, ANZ-observed spending data suggests that consumer spending has stayed strong, with spending momentum similar to pre-pandemic levels," - ANZ Head of Australian Economics, David Plank

Commodities 

"Concerns over rising COVID-19 cases in China weighed on sentiment across commodity markets. This was exacerbated by a stronger USD amid uncertainty over the Fed’s tightening pace," said ANZ senior commodity strategist, Daniel Hynes.

• Iron ore futures fell -0.2% to US$92.6 a tonne

Latest news

Post market brief

Well, the Resource sector seems to be bouncing as markets juggle a clouded supply outlook against China's ongoing covid concerns.

Still, China's daily covid infections have climbed to 27,307 on Monday, just shy of April record highs of 28,973. More than a week after Beijing announced the easing of several covid-related measures such as quarantine requirements, local governments are now struggling to balance easing restrictions and zero covid. It feels like a rather binary outcome, if more lockdowns come then commodity-related things tank, if we see some restrictions but not full-blown lockdowns, then commodity-related things might move sideways or higher.

Still, the market remains in a cautiously optimistic state. It hasn't had any volatile pullbacks like we've seen in the past few months.

Index

S&P/ASX 200: A push above recent highs. Shorter-term moving averages like the 20-day still playing catch up against current levels.

XJO chart (Source: TradingView)

S&P/ASX 200 Energy: Bounced right on cue off previous highs.

XEJ chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• Technology One (TNE) +5.1% profits after tax rose 22% in FY22 to $88.8m

• BlueScope Steel (BSL) +4.8% reaffirmed its August guidance that 1H23 underlying earnings will be in the range of $800-900m  

• Brickworks (BKW) +0.8% AGM noted “once the existing pipeline of work is completed, a period of softer demand is expected, with tightening monetary policy set to act as a handbrake on the housing industry in the medium term.”

• Polynovo (PNV) Trading halt launched an institutional placement of $30m to accelerate its growth in the US and the rest of the world. New shares are priced at $1.90, a 9.1% discount to the stock’s last close

• Calix (CXL) Trading halt shares were halted in order to access a press release that refers to Calix and a potential licence agreement 

• Macquarie Telecom (MAQ) -0.6% AGM notes that earnings will continue to grow in FY23, but only in the second half due to investments in data centres and cloud services in the first  

• Bapcor (BAP) -0.6% AGM notes that trading and wholesale markets remain robust but retail beginning to see lower market growth due to cost-of-living pressures. Temporary margin compression is expected as price adjustments lag higher input costs 

• The Star Entertainment Group (SGR) -1.4% AGM notes that between 1 July to 15 November, Gold Coast domestic revenue was up 32% on pre-covid levels, Brisbane up 9% and Sydney down 11%. At the Group level, revenue was up 1%

• Monadelphous Group (MND) -2.2% AGM anticipates a decrease in FY23 construction revenue before ramping up in FY24. Group revenue is dependent on award and commencement of new construction contracts  

• 29Metals (29M) -2.8% results of feasibility studies for the Gossan Valley Project confirm the viability of a third mining front. The company has made no material capital commitments before end 2023 and will continue to advance/de-risk the project in the near-term 

• Life360 (360) -5.4% successfully raised $50m at $6.30 per share, a 3.55% discount to -6.4% to its last close 

Mid-to-small caps

• Galan Lithium (GLN) +6.2% posted an update on various evaluation workstreams for its Hombre Muerto West Project. Management said the project has the ‘highest grade and lowest impurity lithium brine in Argentina.’

• Select Harvests (SHV) -4.6% reported $4.8m net profit for FY22 compared to $15.1m a year ago. Management note that almond prices remain at historically low levels. Wet weather and inflation is drove crop product costs up 4.4% YoY

• Paradigm Biopharmaceuticals (PAR) -8.8% announces that its CEO Marco Polizzi has stepped down 

• Best & Less (BST) -13.6% Through 20 weeks of trading in FY23, total sales are up 22.8% compared to the prior period but like-for-like sales are down -7.4% 

Broker updates 

Scans