Evening Wrap: ASX flat, financials rally on Bank of Queensland result, US futures higher

The S&P/ASX 200 closed 3 points higher, up 0.04%.

The local sharemarket mustered up a small gain thanks to strong advances from banks and real estate stocks, South Korea raises interest rates by 50 bps and

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

An unexpectedly positive full year result from the Bank of Queensland helped inspire a broad-based rally among large cap banks and real estate stocks, which helped offset declines from all other sectors.

• 9 out of 11 sectors declined

• Financials rallied an outsized 1.9%

• Utilities, Energy and Healthcare sectors fell more than 1%

• 46% of the top 200 declined

Announcements

• Dreadnought Resources (ASX: DRE) +16.3% posted assay results for an additional 43 RC holes which continue to confirm thick, high-grade, rare earth element mineralisation at the Mangaroon Project in WA 

• Bank of Queensland (ASX: BOQ) +11.1% reported a -5% decrease in FY22 cash profits but expects positive margin momentum heading into FY23

• Coronado Global (ASX: CRN) +8.0% confirmed that it was in confidential discussions with Peabody Energy regarding a potential transaction

• Brainchip (ASX: BRN) +3.6% was granted a new US patent for “An Improved Spiking Neural Network”

• Propel Funeral Partners (ASX: PFP) +2.6% posted 33% revenue growth to $44m for the first quarter of FY23, reflecting “strong season tradition conditions and organic growth.” 

• Lake Resources (ASX: LKE) +2.0% entered into a Conditional Framework Agreement with South Korean-based battery manufacturer, SK On for offtake of up to 25,000tpa battery grade lithium and a 10% equity stake in the company

Broker updates 

• 29 Metals (ASX: 29M) Citi downgrades to Neutral from Buy. Target $2.50 from $2.60

• Alumina (ASX: AWC) Citi upgrades to Buy from Neutral. Target $1.60

• Baby Bunting (ASX: BBN) Citi downgrades to Neutral from Buy. Target $3.32 from $5.62

• South 32 (ASX: S32) upgrades to Buy from Neutral. Target $4.60 from $4.50

• Woodside (ASX: WDS) Ord Minnett downgrades to Hold from Accumulate. Target $37

• Whitehaven (ASX: WHC) Citi downgrades to Sell from Neutral. Target $8.30 from $7.40

Economy

• South Korea raised interest rates by 50 bps to 3.0%

  • In-line with analyst expectations

  • “Core inflation and the inflation expectations of the general public have stayed high in the 4% range,” the Bank of Korea said in a statement

  • “Looking ahead, it is forecast that consumer price inflation will remain high in the 5-6% range for a considerable time as the impact of the rising Korean won to US dollar exchange rate acts as additional inflationary pressure.”

  • “Consumer price inflation will be generally consistent with the August forecast of 5.2% in 2022 and 3.7% in 2023, but upside risks are judged to be high due to the rising Korean won to US dollar exchange rate and production cuts by major oil-producing countries, despite downward pressures from the economic slowdown.”

Commodities 

• Iron ore futures on the Dalian Commodity Exchange fell -2.6%

Latest news

Post market brief

We definitely got something unexpectedly positive today - the Bank of Queensland result. In short, the bank said it expects "positive net interest margin momentum" in FY23 and portfolio arrears continued to decline as "no impacts yet seen from either interest rate rises or fixed rate to variable rate conversions."

"The NIM tailwinds for the entire banking sector are strong. Ex resources, hard to think of an industry with more EPS tailwinds than the financials," said Aequitas Investment Partners.

In the absence of this announcement, we probably would've drifted lower like the US market.

US producer price inflation comes out tonight and inflation data comes out tomorrow night. I haven't looked into analyst comments just yet - but who wants to listen to experts anyway after they all piled into a 50 bps hike for the RBA? The inflation print will have a big impact on equity and bond markets. Looking back at the S&P 500 performance on inflation print days:

• August 10: +2.15%

• September 13: -4.3%

• Jan to Sep average: -1.05%

Index

S&P/ASX 200: Tiny bounce ahead of a big next few days.

XJO chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Energy: Pulling back into the 20-day.

XEJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Materials: Little bounce off the 20-day. Still red.

XMJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Real Estate: Double bottom. Previous two rallies have fizzled rather aggressively.

XRE chart (Source: TradingView, Annotations by Market Index)

Scans