Evening Wrap: ASX 200 surges to close the week flat, Energy and Utilities lead gains

The S&P/ASX 200 closed 116 points higher, up 1.75%.

The local sharemarket rallied thanks to a short covering and corporate earnings fuelled rally on Wall Street, China's inflation accelerates, Westpac notes 'gentle slowdown' in card spending activity and clues about a market bottom.

Let's dive in.

Markets

The ASX 200 finishes the week down -0.06% after falling as much as -1.92% for the week. A few more market thoughts in the post market brief below.

• All 11 sectors were green

• Energy, Utilities and Staples rallied more than 2%

• Telcos, Real Estate, Materials and Industrials underperformed benchmarks

• 84% of the Top 200 advanced

Announcements

• Genesis Energy (ASX: GNE) +2.6% said that favourable trading conditions in 1Q23 has resulted in higher-than-expected earnings. The company now expects EBITDA between $455m to $500m

• Autosports (ASX: ASG) +2.5% acquired a ‘strategically important’ property in Brisbane for $98m to operate its Audi, Bentley, Lamborghini and Maserati businesses

  • Perenti Global (ASX: PRN) +2.03% reiterated its FY23 guidance at its AGM, with EBITDA expected to be between $185m to $205m 

• Telix Pharma (ASX: TLX) +1.1% received approval from Health Canada for its Illuccix product for use in staging and restaging intermediate and high-risk prostate cancer

• Emeco (ASX: EHL) -11.2% flagged a potential issue with recovering an outstanding $32m owing to Pit n Portal for contractual services provided to a customer during 2H22 and 1H23 

Broker updates 

• Coles (ASX: COL) UBS retains Neutral. TP $17.25 from $17.50

• Endeavour (ASX: EDV) UBS retains Sell. TP $6.60 from $7.10

• Mineral Resources (ASX: MIN) Citi retains Buy. TP $86 from $76

• Woolworths (ASX: WOW) UBS retains Neutral. TP $35.00 from $37.00

• Qantas (ASX: QAN) Citi upgrades to Neutral from Sell. TP $5.78 from $4.72

Economy

• China’s inflation accelerated to 2.8% in September from 2.5% in August

  • Prices are rising at their fastest pace since April 2020, driven largely by higher prices in food categories 

Commodities 

Energy and metals are mostly trading flat to 1% higher after rallying on Thursday night.

• Iron ore futures on the Dalian Commodity Exchange fell -0.98%

Quick bites 

• The Aussie is weak but not that weak: “The weakness in the Australian dollar is not as stark in trade-weighted terms as it is against the US dollar. This means that currency weakness won’t be a big factor in the RBA’s November forecast update," said ANZ Macro Research

Source: ANZ Research

• 'Gentle slowdown' in card activity: "The Westpac Card Tracker Index lifted through September and early October but continues to show signs of a gentle slowdown in underlying growth momentum," said Westpac. The Index dipped back slightly over the week to 8 October but still ~34% higher than 2019 averages

• A clue for lows: "The S&P 500 closed 5% off the lows and was coming off a 52-week low. We also saw that in March 2009, December 2018 and March 2020," said Ryan Detrick, Chief Strategist at Carson Investment Research

Source: Carson Investment Research

Latest news

Post market brief

The ASX 200 took off after Wall Street. It's been a brutal last couple of weeks filled with fake rallies. Could this be another one of those?

At least for now, it's a start. We closed towards session highs, which is another positive sign.

I've said this numerous times (because it happens so often) but the pullback is just as important as the rally. In the past few weeks, we've seen these massive rallies end with massive selloffs. To stay bullish, you want these pullbacks to be constructive and less volatile.

If we're met with another violent selloff next week, then it would indicate that a rally like today was not filled with genuine buying, but instead things like short covering.

What's interesting about the past few days is that gains have been led by defensive blue chips - financials, the Big Four Banks, Woolworths and Coles. Is this a trend that's likely to continue?

XJO chart (Source: TradingView)

Scans