Evening Wrap: ASX 200 shrugs off China's Covid plan, Westpac slides on cost higher cost guidance

The S&P/ASX 200 closed 41 points higher, up 0.60%.

The local sharemarket extended gains for a second consecutive session as the resource sector helped offset losses from financials and tech, Westpac shares slump on a higher cost outlook, China reaffirms its commitment to zero covid, US inflation data is due at the end of the week and a few charts of interest.

Let's dive in.

Markets

Resources led the ASX 200 higher as commodity markets rallied thanks to an easing US dollar. The market shrugged off news that Chinese health officials were going to stick to strict covid-related curbs, pushing back recent easing hopes.

• Materials led to the upside after the US dollar posted its largest one-day decline since 2015. A weaker US dollar generally gives commodity prices a boost

• Energy trailed close behind despite oil prices falling during local market hours

  • "Drivers are spending less time on the road. Demand in Europe and the US has fallen back below 2019 levels." - ANZ senior commodity strategist, Daniel Hynes

  • "We now expect global demand in Q4 2022 to grow by only 0.6mb/d from the same quarter last year and to moderate next year."

• Financials underperformed despite Westpac's largely positive full-year earnings result. The main negative takeaway was an upward revision to its FY24 cost target from $8bn to $8.6bn due to high inflation

• Tech stocks tumbled, potentially weighed by weaker-than-expected earnings from US names like PayPal and Atlassian. Apple also warned of iPhone shipment delays due to China's ongoing covid lockdowns

Economy

China's balance of trade stood at US$85.1bn in October from US$84.7bn in September.

• Missed analyst expectations of US$95.95bn

China reported 5,643 new covid cases, the biggest one-day increase since early May.

• Health officials reaffirmed their commitment to covid-zero

• “We should adhere to the principle of putting people and lives first, and the broader strategy of preventing imports from outside and internal rebounds," said disease control official Hu Xiang, CNBC reported

• Chinese stocks rebounded within minutes after a weak open

Commodities 

Commodity prices mostly eased after China quashed the rumours about a reopening for early next year. Commodities including oil, copper, iron ore and platinum all fell around -1% during our market hours.

• Iron ore futures fell -1.5% to US$86 a tonne

Latest news

Post market brief

It's going to be another week where the market's performance will be heavily skewed to whatever happens in the US. The blackout period for Fed policymakers is over, so key highlights from their speeches will return to our Morning Wraps. Will they continue to push their hawkish rhetoric?

US inflation data is due before market open on Friday, which has been a rather binary event to date. Inflation cools and the market rallies, inflation remains high and the market falters. (Except for last month where the S&P 500 rallied 2.6% a hotter-than-expected print)

China continues to reiterate its zero covid stance but the ASX 200 doesn't seem to care. You'd somewhat expect names like BHP and Fortescue to fade after a headline like that. But they didn't. Is this strength I'm seeing?

Index charts

S&P/ASX 200: Nothing much to see here. We've managed to defend those ~6,820 lows and now trying to push the 200-day (blue).

XJO chart (Source: TradingView)

S&P/ASX 200 Energy: Powering ahead despite China doubling down (again) on zero covid. 

XEJ chart (Source: TradingView)

S&P/ASX 200 Materials: Rallying into the 200-day moving average. The damaged trend is starting to heal. But can it hold this key level?

XMJ chart (Source: TradingView)

S&P/ASX 200 Financials: First touch of the 20-day (red) since 12 October.

XFJ chart (Source: TradingView)

A few graphite specs of interest

Black Rock Mining chart (Source: TradingView)

Renascor Resources chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• Capricorn Metals (ASX: CMM) +10% upgraded its Mt Gibson Gold Project mineral resource estimate by 32% to 2.76m ounces  

• Telix Pharma (ASX: TLX) +0.7% announced ‘highly positive’ top-line results from its Phase III ZIRCON study, which investigates its renal kidney cancer imaging agent. The study met its co-primary and secondary endpoints

• Medibank (ASX: MPL) +0.4% said the company will not pay any ransom demand for the data theft

• Suncorp (ASX: SUN) -0.4% notes five declared natural hazard events across Australia and New Zealand since the start of FY23. the total cost is expected to be $350-410m versus the company’s natural hazard allowance of $1.16bn

• GQG Partners (ASX: GQG) -2% reported its monthly funds under management update, which rose 5.8% to US$83.8bn

• Westpac Bank (ASX: WBC) -3.9% earnings beat analyst estimates but its FY24 cost target was revised to $8.6bn from $8.0bn to reflect higher inflation 

• Coronado Global (ASX: CRN) -7.05% announced it has ceased discussions with Peabody Energy regarding a potential merger  

Mid-to-small caps

• Arafura Rare Earths (ASX: ARU) +13.1% signed a binding offtake agreement with Hyundai and Kia for the supply of NdPr from its Nolans Project over a 7-year period

• AngloGold (ASX: AGG) +7.9% paid $150m to Coeur Mining, which owns neighbouring properties to AngloGold

• Eclipx Group (ASX: ECX) -5.85% posted 29% net profit growth for the year ended 30 September. Current CFO Damien Berrell will also succeed Julian Russell as company CEO

Broker updates 

Scans