Market Wraps

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

Mon 07 Nov 22, 4:46pm (AEST)

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.


Today in Review

Mon 07 Nov 22, 4:16pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 6,933.7 +0.60%
All Ords 7,129.2 +0.56%
Small Ords 2,800.5 +0.60%
All Tech 2,049.6 -1.33%
Emerging Companies 2,134.7 +0.93%
Currency
AUD/USD 0.6429 -0.66%
US Futures
S&P 500 $3,773.25 -0.17%
Dow Jones $32,389.0 -0.12%
Nasdaq $10,864.0 -0.24%
Name Value % Chg
Sector
Materials 16,195.2 +3.71%
Energy 11,982.3 +1.35%
Utilities 7,239.4 +0.87%
Consumer Discretionary 2,856.3 +0.81%
Consumer Staples 12,258.0 +0.75%
Industrials 6,281.5 +0.47%
Health Care 40,360.4 +0.35%
Communication Services 1,415.0 +0.17%
Real Estate 2,953.3 -0.12%
Financials 6,395.2 -1.43%
Information Technology 1,414.0 -2.17%

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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
XJO chart (Source: TradingView)

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

XEJ chart
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
XMJ chart (Source: TradingView)

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

XFJ chart
XFJ chart (Source: TradingView)

A few graphite specs of interest

BKT 2022-11-07 16-35-46
Black Rock Mining chart (Source: TradingView)
RNU 2022-11-07 16-35-29
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 

Ticker

Company

Broker

Rating

Target price

ARB

ARB Corp

Citi

Buy

$39.25

COL

Coles

Morgan Stanley

Underweight

$13.70

CSR

CSR

Credit Suisse

Outperform

$6.10 from $6.40

ORI

Orica

Credit Suisse

Neutral

$14.55 from $16.67

PDL

Pendal

Credit Suisse

Neutral

$4.80 from $5.20

REA

REA Group

Credit Suisse

Outperform

$143 from $143.80

SGM

Sims

Morgan Stanley

Equal-weight

$13.00 from $19.00

WOW

Woolworths

Morgan Stanley

Underweight

$28.50


Scans

Top Gainers

Code Company Last % Chg
JAL Jameson Resources... $0.10 +53.85%
DMM DMC Mining Ltd $0.15 +50.00%
NOV Novatti Group Ltd $0.26 +40.54%
AQI Alicanto Minerals... $0.053 +39.47%
KNM Kneomedia Ltd $0.025 +38.89%
View all top gainers

Top Fallers

Code Company Last % Chg
HIQ HITIQ Ltd $0.06 -25.00%
TYX Tyranna Resources... $0.032 -23.81%
FRS Forrestania Resou... $0.195 -23.53%
PPY Papyrus Australia... $0.04 -21.57%
CR9 Corella Resources... $0.024 -20.00%
View all top fallers

52 Week Highs

Code Company Last % Chg
JAL Jameson Resources... $0.10 +53.85%
WR1 Winsome Resources... $1.00 +35.14%
GRX Greenx Metals Ltd $0.32 +16.36%
ALY Alchemy Resources... $0.042 +15.28%
WRK WRKR Ltd $0.025 +13.64%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
CR9 Corella Resources... $0.024 -20.00%
SKN Skin Elements Ltd $0.016 -15.79%
WOA Wide Open Agricul... $0.24 -14.29%
CSX Cleanspace Holdin... $0.51 -12.07%
ICR Intelicare Holdin... $0.024 -11.11%
View all 52 week lows

Near Highs

Code Company Last % Chg
WTC Wisetech Global Ltd $54.68 -5.66%
NDIA Global X India Ni... $64.14 -0.19%
ANN Ansell Ltd $28.165 +0.02%
USD Betashares U.S. D... $14.99 -1.32%
PWR Peter Warren Auto... $2.81 -1.75%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
EZL EUROZ Hartleys Gr... $1.15 0.00%
BOQPF Bank of Queenslan... $100.93 -0.33%
WSP Whispir Ltd $0.47 0.00%
BRX Belararox Ltd $0.29 -3.33%
BRN Brainchip Holding... $0.625 +1.63%
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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