Market Wraps

Evening Wrap: ASX 200 reverses early losses, iron ore miners rally, Australia's inflation eases

Wed 01 Mar 23, 5:17pm (AEST)

The S&P/ASX 200 closed 7 points lower, down -0.1%.

The local sharemarket rallied off session lows of -0.58%, Australia's economy slows in Q4 but inflation data was cooler-than-expected and China's factory activity surprises with the fastest growth in a decade.

Let's dive in.


Today in Review

Wed 01 Mar 23, 5:07pm (AEST)

Name Value % Chg
Major Indices
ASX 200 7,251.6 -0.09%
All Ords 7,456.1 -0.03%
Small Ords 2,863.2 -0.04%
All Tech 2,200.7 -0.73%
Emerging Companies 2,165.4 +1.00%
Currency
AUD/USD 0.675 +0.32%
US Futures
S&P 500 3,977.0 +0.04%
Dow Jones 32,712.0 +0.09%
Nasdaq 12,074.25 +0.02%
Name Value % Chg
Sector
Materials 18,188.9 +2.29%
Energy 11,165.8 +1.62%
Consumer Discretionary 2,952.6 -0.28%
Utilities 8,224.0 -0.29%
Industrials 6,589.1 -0.51%
Information Technology 1,508.3 -0.64%
Health Care 42,470.1 -0.90%
Consumer Staples 13,268.2 -1.03%
Financials 6,379.6 -1.21%
Real Estate 3,144.1 -1.73%
Communication Services 1,458.7 -2.27%

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ASX 200 Session Chart

XJO 2023-03-01 16-28-07
A positive inflation print at 11:30 am AEDT helps the ASX 200 surge from session lows of -0.58% to close around breakeven (Source: TradingView)

Markets

The market reversed off session lows thanks to positive economic data including cooler-than-expected inflation (7.4% in January vs. estimates of 8.1%) and stronger-than-expected PMIs from China. The inflation print helped take some heat out of bond yields, with the 3-year down 13 bps to 3.51%.

  • Materials and Energy rallied after China's manufacturing PMIs unexpectedly surged to levels not seen since April 2012

  • Defensive sectors and banks led to the downside

Economy

Australia’s GDP growth rate decelerated to 0.5% in the December quarter from 0.7% in the previous quarter. 

  • Missed consensus estimates of 0.6%

  • "The 0.4 per cent rise in total consumption and 1.1 per cent rise in exports were the primary contributors to GDP growth in the December quarter. Continued growth in household and government spending drove the rise in consumption, while increased exports of travel services and continued overseas demand for coal and mineral ores drove exports.” - Katherine Keenan, ABS Head of National Accounts

Australia’s inflation rate eased to 7.4% year-on-year in January from 8.4% last December.

  • Beat economist expectations of 8.1%

  • Still the second highest annual increase since the start of monthly CPI indicator series in 2018 

  • Housing, Food and non-alcoholic beverages and Recreation were the main contributors, up 9.8%, 8.2% and 10.2% respectively

China’s manufacturing PMI jumped to 52.6 in February from 50.1 in January.

  • The 50-point mark separates expansion and contraction in activity

  • Beat analyst expectations of 50.05

  • The highest reading since April 2012

  • Services PMI also beat expectations, accelerating to 56.3 in January from 54.4


Latest news


Market Insights

China's massive liquidity injection

China is pumping a record amount of liquidity into its financial system. Local banks extended 4.9 trillion yuan (US$710bn) in new loans in January 2023, up from 1.40 trillion in the previous month.

2023-03-01 16 58 52-China New Yuan Loans - February 2023 Data - 2004-2022 Historical - March Forecas
Source: TradingEconomics

The other thing to note from this is that Chinese PMIs are tightly correlated with the US ISM manufacturing Index. If the correlation hold, then the US ISM could soon begin to bottom.

FpkmAbvXwAA6a-g
Source: BEA

The correlation matters because the ISM has been the best coincident indicator of a bottom for equity markets, according to the Bureau of Economic Analysis.

FpkmAzzXEAMSbK6
Source: BEA

Interesting news and movers

Trading higher

  • +11.3% Hastings Resources (HAS)

  • +10.9% Base Resources (BSE)

  • +8.0% Baby Bunting (BBN)

  • +8.3% Arafura (ARU) – Bounce after -12% in previous three

  • +5.7% Strike Energy (STX) – Up 13% in previous three

  • +4.4% Aeris Resources (AIS) – Bounce after -22.8% in previous three

  • +1.0% Pilbara Minerals (PLS) – $250m block trade at $4.10 pre-market 28 Feb

Trading lower 

  • -9.1% Cooper Energy (COE) – 1H earnings (Tuesday)

  • -5.7% Link Administration (LNK) – Trading ex-div

  • -5.4% SiteMinder (SDR)

  • -5.3% Polynovo (PNV)

  • -3.8% Strandline Resources (STA) – 1H earnings

  • -3.3% Tyro Payments (TYR) - 1H earnings (Tuesday)


Broker updates 

Goldman’s view on recent earnings: 

Harvey Norman (HVN): Buy with $4.70 target price

  • 1H23 results missed Goldman revenue and net profit expectations by 3.4% and 6.3% respectively

  • Australian Franchise Operations was viewed as a key miss with a softer-than-expected second quarter (like-for-like sales down -5.1%)

  • Remain Buy rated as property valuation of $3.3bn represents ~70% of market cap and trades at a much cheaper valuation relative to JB Hi-Fi

NextDC (NXT): Buy with $13.30 target price

  • “Although contracted growth was marginally softer than GSe, NXT clearly expects to sign meaningful new contracts imminently, and has accelerated 10MW of S3 capacity.”

  • 2H23 guidance implies an acceleration in revenue but sequential decline in EBITDA due to increased land holding and power costs

PointsBet (PBH): Neutral with $1.62 target price

  • Normalised EBITDA of -$149.1m was largely in-line with Goldman Sachs estimates

  • Management flagged that Australia’s wagering industry remained weak into early 2H23, in-line with commentary from Tabcorp

  • “While the balance sheet is currently cash positive, we expect cash burn to result in capital requirements in 2025 or on the flipside, lower marketing capacity and slower growth in the interim.”

Sandfire (SFR): Outperform with $7.00 target price

  • 1H23 results was broadly in-line with estimates, cash flow metrics were previously disclosed 

  • “Guidance ranges for MATSA remain unchanged with the mine expected to deliver stronger output in 2HFY23.”

  • “The Motheo project is on track for first production in 4QFY23 and presents a

  • key near-term catalyst for SFR.”

Tyro Payments (TYR): Neutral with $1.70 target price

  • 1H23 result was in-line with pre-reported figures

  • “TYR appears on track for FY23 guidance, but attention will quickly shift to FY24. Concerns around weaker economic activity and downside risk to FY24 earnings expectations limit the potential for outperformance.”


Scans

Top Gainers

Code Company Last % Chg
LRD Lord Resources Ltd $0.19 +22.58%
MYX Mayne Pharma Grou... $3.94 +18.68%
1AE Aurora Energy Met... $0.13 +18.18%
IAM Income Asset Mana... $0.18 +16.13%
CY5 CYGNUS Metals Ltd $0.335 +15.52%
View all top gainers

Top Fallers

Code Company Last % Chg
LAW Lawfinance Ltd $0.011 -26.67%
DUB Dubber Corporatio... $0.23 -25.81%
3DP Pointerra Ltd $0.12 -22.58%
MDX Mindax Ltd $0.047 -20.34%
CBH Coolabah Metals Ltd $0.11 -18.52%
View all top fallers

52 Week Highs

Code Company Last % Chg
RXH Rewardle Holdings... $0.016 +14.29%
OBM Ora Banda Mining Ltd $0.11 +10.00%
DUR Duratec Ltd $0.83 +7.79%
WBT Weebit Nano Ltd $8.17 +6.94%
ECL Excelsior Capital... $2.68 +5.51%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
LAW Lawfinance Ltd $0.011 -26.67%
DUB Dubber Corporatio... $0.23 -25.81%
3DP Pointerra Ltd $0.12 -22.58%
MDX Mindax Ltd $0.047 -20.34%
VN8 VONEX Ltd $0.056 -17.65%
View all 52 week lows

Near Highs

Code Company Last % Chg
SMLL Betashares Aust S... $3.48 -0.57%
OZBD Betashares Austra... $43.92 +0.11%
AN3PI Australia and New... $103.59 -0.01%
PCI Perpetual Credit ... $1.01 -0.49%
WVOL Ishares Edge MSCI... $34.47 -0.55%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
OBL Omni Bridgeway Ltd $2.88 -4.95%
NVA Nova Minerals Ltd $0.535 +1.91%
CUV Clinuvel Pharmace... $19.25 +0.84%
COB Cobalt Blue Holdi... $0.40 -1.24%
HVN Harvey Norman Hol... $3.76 -2.34%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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