Evening Wrap: ASX 200 rallies, UBS downgrades iron ore miners, Fed hike in focus

The S&P/ASX 200 closed 48 points higher, up 0.67%.

Markets

The ASX 200 rallied 0.60% as the market opened, slumped to 0.10% around 11:30 am AEDT and spent the rest of the session steadily grinding higher, closing 0.61% higher.

• Utilities led to the upside as heavyweight Origin Energy rallied 2.2% but still down -4.5% for the week following the government's oil and gas price caps

• Tech names rallied thanks to a dip in bond yields and risk-on attitude. Block rallied 8.5% after Piper Sandler upgraded the stock to Overweight from Neutral, citing years of consistent earnings and revenue growth

• Real Estate was another sector benefiting from a decline in bond yields

• Resources pared gains after the US Dollar Index hit a fresh four month low

• 148 of the top 200 advanced (74%)

Economy

No major economic announcements.

Commodities 

“A risk-on rally across markets saw commodities surge higher. A lower-than-expected inflation print sparked the rally, while a weaker USD added support. Ongoing easing of virus controls in China boosted sentiment,” said ANZ senior commodity analyst, Daniel Hynes. 

• Copper +0.6% to US$3.87/lb

• Iron ore futures -0.6% to US$107.85 a tonne

Latest news

Post market brief

Short one today. The ASX 200 got a solid rally, especially after the S&P 500 faded a 2.77% gain to close 0.73% higher. Several big four banks and the three iron ore majors were all down in early trade and managed to close in positive territory, helping the index close towards session highs.

The Fed is widely expected to deliver a 50 bp rate hike tomorrow morning at 6:00 am AEDT. The S&P 500 has generally pushed higher on Fed rate hike days:

• 16 March +2.2%

• 4 May +3.0%

• 15 June +1.5%

• 27 July +2.6%

• 21 September -0.83%

The Fed's Press Conference will follow shortly after at 6:30 am AEDT, where Powell's comments will be key.

On 21 September, the S&P 500 rallied 1.33% after the rate hike and at the beginning of the press conference, only to finish -0.83% by the end of the presser.

Major announcements

Large caps (>$1bn)

• New Hope (NHC) +1.1%: Paused its share buyback program and commence a buyback of its 2.75% senior convertible notes due 2026 with a face value of $200m

• Westpac Bank (WBC) -0.4%: Chairman John McFarlane announced his plans to retire at the conclusion of the 2023 AGM in December next year 

Mid-to-small caps

• St Barbara (SBM) +13.9%: Notes a successful $275m capital raising by Genesis Minerals. The two companies plan on merging to to form Hoover House - a leading Australian gold company with a base production target of 300,000 ounces of gold per annum    

• Genesis Minerals (GMD) +12.6%: Successfully raised $275m at $1.20 per share, representing a 0.4% premium to its last close. Proceeds will be used to fund its merger with St Barbara  

• Leo Lithium (LLL) +6.5%: Posted further high-grade lithium hits at the Goulamina Lithium Project in Mali

• Strike Energy (STX) +6.2%: Entered into a long-term gas supply agreement with Santos from 1Q23 onwards, for a five year period 

• Talga (TLG) +3.7%: Achieved Tier-1 automotive and battery customer targets in qualification tests. Customer tests showed Talnode-Si ‘significantly boosts’ Li-on battery energy capacity  

Trading halts

• Global Lithium (GL1): Shares will resume trading on Friday, 16 December, pending a resource update for the Manna and Marble Bar Lithium Projects

Broker updates 

Yes, brokers downgraded their ratings but increased their target prices.

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