Evening Wrap: ASX claws back weekly losses, resource sectors surge

The S&P/ASX 200 closed 56 points higher, up 0.8%.

The local sharemarket posts a weekly fall of -0.15%, resources carried the market close to breakeven, COVID restrictions in the first-half of FY22 smashed Wesfarmers and bonds are extremely nervous in the lead up to Jackson Hole.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 10 out of 11 sectors advanced

• Energy and Materials led thanks to more stimulus from China

• Staples bounced back after a four day losing streak

• Growth-heavy sectors like Tech and Discretionary underperformed

• 64% of the top 200 companies declined

Stocks

• Terracom (ASX: TER) +15.3% declared a final dividend of 10 cents per share. This represents a yield of 10% based on Friday’s open

• Bega Cheese (ASX: BGA) +11.8% posted FY22 revenue growth of 45% but profits fell -69% to $24.2m due to significant disruption and costs related to covid and floods

  • Bega CEO: “... cost out programs while benefiting from strong underlying growth in key brands, a step change in white milk retail pricing and the realisation of higher selling prices in the market reflecting increased farm gate milk prices and other costs increases.”

• Lynas Rare Earth (ASX: LYC) +1.2% reported a 244% jump in FY22 net profits to $540.8m

  • Lynas CEO: “The company continues to receive many approaches from end users seeking to secure their raw material sourcing over the longer term and is engaged in productive discussions with a number of end users."

• Wesfarmers (ASX: WES) +0.65% reported FY22 revenue growth of 8.5% but net profits fell -1.2% to $2.35bn, ahead of Bloomberg estimates of $2.2bn

  • Wesfarmers CEO: “The Group’s financial results for the year reflect the material impact of COVID-19 on trading conditions during the first half, which included weeks where almost half of the Group’s retail stores were either subject to trading restrictions or closed."

  • “In the second half of the year, Wesfarmers delivered strong NPAT growth of 13.1 per cent excluding significant items in the prior period, with trading conditions improving as restrictions were eased.”

• Ramsay Healthcare (ASX: RHC) -3.3% shares fell after KKR pulled its $88 a share all-cash offer. Ramsay posted FY22 revenue growth of 3.1% but profits tanked -39% to $274m

  • Ramsay: “We expect a gradual recovery through FY23 and more normalised conditions from FY24 onwards.”

• Australian Ethical Investment (ASX: AEF) -3.9% profits fell -15% in FY22 but expenses rose 28%. Funds under management rose 2% to $6.2bn

  • AEF CEO: “We expect the growth in net inflows to continue in FY23, with further diligent investment in the business as we execute our strategic roadmap, balancing market volatility with the growth opportunity. As such, our profit outlook will reflect the higher growth in operating expenses versus revenue.” 

• Smartgroup (ASX: SIQ) -11.4% reported FY22 revenue growth of 4% and net profits rose 16% to $30.9m

  • Smartgroup CEO on vehicle leasing: “However, lower consumer confidence, driven by rising interest rates and inflationary pressures on households, and extended vehicle delays have led to potential customers delaying buying decisions.”

• Macquarie Telecom (ASX: MAQ) -11.7% posted FY22 revenue growth of 8.5% but profits tanked -32.6% to $8.5m

• Polynovo (ASX: PNV) -18.8% posted FY22 revenue growth of 42.8% to $41.9m but operating expenses jumped 52% to $41.5m, resulting in a net loss of -$2.0m

  • “Loss continues to be minimised compared to business expansion … increased head is having the desired impact on sales growth.”

  • “Continue to reinvest cash flows to grow revenue and market share in FY23.”

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange rose 2.8%

  • I post a 'Commodities Spotlight' every Friday. This week we look at ANZ upgrading its outlook for copper, depressed iron ore margins, aluminium supply and muted uranium spot prices

Scans

Latest news

Post market charts

What a wild week. Two consecutive days of intraday selling followed by three consecutive days of intraday buying. Going full circle in a market like this. You can't complain.

Still, not all gains are made equal. What drove the market? Mostly heavyweight names like Woodside (ASX: WDS), BHP (ASX: BHP), Fortescue (ASX: FMG), CSL (ASX: CSL) and Woolworths (ASX: WOW).

A lot of the growth-heavy and battery metal-related sectors that led massive July rally struggled for upside. Just an observation.

S&P/ASX 200: I personally don't feel comfortable when a chart is V-shaped. But here we are. The three day win streak has helped the ASX 200 reclaim the 200-day moving average, which is also starting to flatten (in a good way).

S&P/ASX 200 Chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Energy Index: Commodities was the place to be this week. The Energy Index has taken out June highs and trading at levels not seen since February 2020. It's funny how energy is breaking out now, when oil isn't over US$100 a barrel.

S&P/ASX 200 Energy Index Chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Materials: I’ve realised I can just copy and paste yesterday’s commentary about commodities. That materials/iron ore stocks are ‘slowly chugging along as China pushes out another stimmy headline.' Rio Tinto (ASX: RIO) seems to be the large cap laggard, still chopping around its recent 2-month trading range. BHP (ASX: BHP) is powering ahead. Fortescue (ASX: FMG) had a massive day up 3.8%, pushing off the 200-day and breaking above its price level its been trading around for the last three weeks.

S&P/ASX 200 Materials Index Chart (Source: TradingView)

Stocks

Uraniums pulling back: It’s no surprise that the trendless sector that’s gone nowhere for 12 months is now pulling back after a massive two-day winning streak on Wednesday and Thursday. Perhaps why investors should 'mind the gap'. A name like Boss Energy (ASX: BOE) has completely reversed Thursday's gains.

Mineral Resources (ASX: MIN): Rallying into the $65 level. Will history repeat itself?

Mineral Resources weekly chart (Source: TradingView, Annotations by Market Index)

Follow up charts

Macquarie Telecom (ASX: MAQ): From Thursday “Poking its head above an 8-month trendline”. Today, it gets absolutely blasted on earnings. Perhaps a friendly reminder to check the calendar first during reporting season.

Macquarie Telecom chart (Source: TradingView, Annotations by Market Index)

Food for thought

Jackson Hole fireworks: Zerohedge wrote an interesting article about bond market anxiety in the lead up to Jackson Hole. "The MOVE index of implied bond volatility -- at times seen as the Treasuries fear gauge -- has rarely been this high in late August. In fact, the only other times it was around or above current levels at this time of the year was in 1990, 2002-03 and 2009," notes the article.

I'm outta here. Have a good weekend and I'll see you guys on Monday :)