Evening Wrap: ASX 200 snaps winning streak as resources slump, Australian retail sales fall

The S&P/ASX 200 closed 30 points lower, down -0.42%.

The local sharemarket falls thanks to declines from mining and energy stocks, Australian retail sales unexpectedly contract month-on-month and Bank of Queensland shares tank -5.6% as the search for a new CEO begins.

Let's dive in.

Markets

The ASX 200 snaps a four day winning streak as China's worsening covid battle front takes some heat out of equity markets. Gains from value sectors like Real Estate and Telcos failed to offset the losses from Resources.

• Energy led to the downside after oil prices tumbled around -3% during the local session

• Materials stocks declined even though iron ore prices remain relatively unchanged. Copper prices fell -1.8%.

• Discretionary was another notable loser after month-on-month retail sales unexpectedly fell in October. The first decline this year.

• Several defensive and value sectors outperformed but unable to offset the losses from resource-related stocks

• 99 of the top 200 advanced (49.5%)

Economy

Australian retail sales unexpectedly fell -0.2% month-on-month in October from 0.6% in September.

• Well-below consensus expectations of 0.5% growth

• “The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending.” - Ben Dorber, ABS head of retail statistics

• “Turnover fell in all industries in October except for food retailing, which rose 0.4 per cent boosted by flood-related spending in parts of Australia and continued high food prices.” - Dorber  

Commodities 

“Concerns over demand weighed on sentiment across commodity markets last week. Rising case numbers of COVID-19 in China drove those concerns amid a broadly weaker economic backdrop,” said ANZ senior commodity analyst, Daniel Hynes. 

• Iron ore futures -0.1% to US$92.95/t

• Gold -0.2% to US$1,751/oz

• Copper -1.8% to US$3.56/lb

• Brent crude -3.0% to US$81.3/bbl

Latest news

Post market brief

The ASX 200 pulls back as covid isn't only raging across China but so are lockdown protests. The situation is getting ugly, but we won't know the true economic impact until much later.

Energy stocks are headlining the losses as the the decline in social mobility in China is weighing on oil demand. Encouraging, mining stocks aren't freaking out, at least for now. Iron ore majors BHP and Rio Tinto closed 1-1.5% lower and Fortescue managed to squeeze out a small gain.

At the index level, the pullback seems rather orderly and the theme of capital rotating to defensive sectors remains intact. The rest of the week will give us a better indication as to how this China covid blowout sits with the market.

Fed Chair Powell also speaks on Thursday morning, which could be another major direction-driving catalyst for markets.

Index

S&P/ASX 200: Will we have a tiny pullback or a much bigger correction? Let's see how the market holds up.

XJO chart as at 3:50 pm AEDT (Source: TradingView)

S&P/ASX 200 Energy: Pulling back into former highs.

 XEJ chart as at 3:50 pm AEDT (Source: TradingView)

Sectors and stocks

No charts today, unfortunately.

Lithium: Most lithium stocks failed to bounce on Monday, which continues our recent analogy of: Increasingly oversold? Yes. Is a bounce due? Eventually. Momentum? Rather damaged.

Gold: Gold name are holding up relatively well after a massive run up. Can we see more consolidation to let moving averages catch up to current prices.

Major announcements

Large caps (>$1bn)

• Atlas Arteria (ALX) +1.3% received all regulatory approvals in relation to its 66.67% interest in Skyway Concession Company, the concessionaire of the Chicago Skyway

• Vulcan Energy (VUL) -0.4% commenced 3D seismic survey works in one of the company’s Phase 2 lithium and geothermal energy development areas in the Upper Rhine Valley Brine field

• Pilbara Minerals (PLS) -0.90% entered into a joint venture agreement with Calix to develop a Demonstration Plant at the Pilgangoora Project to produce lithium salts 

• Bank of Queensland (BOQ) -5.6% has commenced a domestic and international executive search for a new Managing Director and Chief Executive Officer 

• Healius (HLS) -10.1% reported a -64.1% decline in EBITDA for the first four months to October 2022. The company said covid testing has fallen from 13,000 tests per day in July to 3,000 to 4,000 from October onwards 

Mid-to-small caps

• Adriatic Metals (ADT) +0.7% provided an update for its Vares high-grade silver project in Bosnia. 50% of the total project construction complete and first concentrate production is scheduled for 3Q23 

• Australian Ethical Investment (AEF) -2.3% completed a successor fund transfer of Christian Super into Australian Ethical Super, welcoming 28,000 new members to AEF 

• Renascor Resources (RNU) -3.1% received approval from the South Australian Department of Energy and Mining for the Program for Environment Protect and Rehabilitation for its proposed Sivior Mine and Concentrator in South Australia

• Queensland Pacific Metals (QPM) -28.6% announced the results of its Advanced Feasibility Study for its TECH Project. Stage 1 has a base case pre-tax NPV of $2.67bn with a nameplate capacity of 1.05m tonnes of various metals including nickel and cobalt sulphate.

Trading halts

Broker updates 

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