Evening Wrap: ASX 200 slumps, Woodside posts record revenues, unemployment data disappoints

The S&P/ASX 200 closed 69 points lower, down -1.02%.

The local sharemarket was under pressure following a pick up in bond yields, Woodside and Santos post record quarterly earnings, the US Department of Energy selects three ASX-listed battery metal names for funding grants and Australian unemployment figures disappoint.

Let's dive in.

Markets

The ASX 200 tumbled after a weak lead from Wall Street. Stocks are under pressure as bond yields pick up again after hotter-than-expected inflation prints from the UK and Canada as well as more hawkish comments from the Fed.

• 9 out of 11 sectors fell

• Energy rose an outsized 3.1% thanks to higher oil prices and a positive quarterly update from Woodside

• Financials and Staples also outperformed on a relative basis

• Technology fell an outsized -3.76%. Growth stocks are the most vulnerable to rising interest rates given their rich valuations

• Materials, Healthcare and Utilities also underperformed

• 82% of the top 200 advanced

Announcements

• Syrah Resources (ASX: SYR) +10.4% was selected by the US Department of Energy (DoE) for a grand of up to US$220m for its Vidalia anode project

• Piedmont Lithium (ASX: PLL) +8.9%  was selected for a US$141.7m grant from the DoE to support the construction of its Tennessee Lithium project 

• Novonix (ASX: NVX) +7.5% was selected by the DoE to enter negotiations for US$150m in funding to expand its US-based production of graphite anode materials

• Woodside (ASX: WDS) +6.2% reported its first full three months of contribution from the former BHP petroleum assets. Production jumped 52%. Full-year guidance was upgraded to 153-157 MMboe  

• Challenger (ASX: CGF) +4.6% posted total life sales of $2.8bn in the September quarter, up 33%. Group assets under management fell -2% QoQ to $96bn  

• Heartland (ASX: HGH) +3% to purchase Challenger Bank, now positioned to become a major bank in Australia 

• Santos (ASX: STO) +2.0% posted a 2% QoQ rise in production and 15% QoQ revenue growth to a record $2.2bn 

• Zip (ASX: ZIP) +1.6% posted 19% You revenue growth in 1Q23. Management reassured investors about lowering credit losses and accelerating its path to profitability 

• Auckland Airport (ASX: AIA) +0.3% upgraded its FY23 profit guidance to $100-130m from the $50-100m provided in August

• Transurban (ASX: TCL) -1.1% notes that average daily traffic in the September quarter have exceeded pre-covid levels and now at all-time highs 

• Evolution Mining (ASX: EVN) -8% posted a -6.7% QoQ decline in gold production to 161koz in the September quarter. Costs rose 17.3% to $1,513/oz. FY23 guidance reaffirmed 

• Sandfire (ASX: SFR) -13.2% lifted its Group production guidance for FY23 to 83,91k tonnes of copper. September quarter C1 costs were US$1.73/lb, slight ahead of FY23 guidance of $1.72/lb 

Broker updates 

• Bapcor (ASX: BAP) Credit Suisse downgrades to Neutral from Outperform. TP $6.60 from $7.50

• Bank of Queensland (ASX: BOQ) UBS downgrades to Neutral from Buy. TP $8

• Beach Energy (ASX: BPT) Morgans upgrades to Add from Hold. TP $1.69 from $1.74

• CBA (ASX: CBA) Morgans upgrades to Hold from Reduce. TP $94.57 from $77

• Costa Group (ASX: CGC) Credit Suisse upgrades to Outperform from Neutral. TP $2.50 from $2.90

• Westpac Bank (ASX: WBC) Morgans upgrades to Add from Hold. TP $26.7 from $24

Economy

• Australia unemployment rate was unchanged at 3.5% in September

  • "With employment increasing slightly, by around 1,000 people, and the number of unemployed increasing by 9,000, the unemployment rate rose by less than 0.1 percentage point but remained at 3.5 per cent in rounded terms,” said  ABS Head of Labour Statistics, Bjorn Jarvis

  • “Some of the slowing in hours worked reflected a higher than usual number of people taking annual leave in September. This follows the past two Septembers when there were lower than usual numbers of people taking leave, given COVID-19 lockdowns and other restrictions.”

Commodities 

• Iron ore futures on the Dalian Commodity Exchange fell -2.5% to a near 2-month low

Other commodities of interest:

• Natural gas +2.1% to US$5.9/MMboe

• Uranium futures +1.3% to US$51.6/lb

Quick bites 

• Westpac on Aussie inflation: "Westpac is forecasting a quite solid 1.1% print in the September quarter lifting the annual pace 0.4 ppt to 6.5%. We also raised the peak in annual inflation to 7.7% at the December quarter 2022 from the current published forecast of 7.5%," said Westpac Economics

• Labour market softening: "Australia’s labour market data were softer than expected in September but support the view that a 25 bp cash rate hike by the RBA is the most likely outcome in November," said ANZ Research

Latest news

Post market brief

What a rough market. It feels like there's these 2-4 day windows to enjoy some solid gains followed by a sharp pullback that may or may not undercut recent lows.

The market was under pressure on Thursday mainly due to the rise in bond yields. The US 2 and 10 year Treasury yields rallied to multi-year highs again overnight. Looking back at the past few months, every time yields have taken another leg up, the US market has taken another leg down. Though, the ASX 200 is in much better shape, given our weighting towards Financials and Resources.

The rise in yields hurt long duration aka growth stocks the most. The ASX 200 Tech Index lead to the downside, closing -3.8% lower. There were rather sharp declines for some tech heavyweights like Altium (ASX: ALU) -7.2% and Xero (ASX: XRO) -5.2%.

Higher yields will continue to humble any bullish narrative that the market might try muster up.

Index

S&P/ASX 200: Big red candle right as the ASX 200 tries to poke its head above the 50-day moving average. Looks like history is repeating itself. Lets see if recent lows around 6,650 can provide some support.

XJO chart (Source: TradingView)

S&P/ASX 200 Energy: Recent price action has been rather choppy but can the solid updates from Santos and Woodside see another attempt at breaking out?

XEJ chart (Source: TradingView)

S&P/ASX 200 Tech: Selling off at the 50-day. Keep an eye on yields and whether or not they trend higher.

XIJ chart (Source: TradingView)

Scans