Evening Wrap: ASX reverses Thursday's gains, Big 4 banks stocks slide

The S&P/ASX 200 closed 81 points lower, down -1.23%.

The local sharemarket reversed most of Thursday's gains, Materials and Energy stocks stopped the market from falling further, Core Lithium kicks off a cheeky $100m capital raise and the Big Four banks all dip around -2%.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

Most of Thursday's gains evaporated on Friday. The ASX 200 was progressively sold down throughout the day, closing near session lows.

• 9 out of 11 sectors declined

• Materials bucked the trend, up 0.67% thanks to gains from heavyweight iron ore miners BHP, Rio Tinto and Mineral Resources

• Energy also eked out a tiny 0.07% gain

• Growth heavy sectors like Tech and Discretionary led to the downside

• Financials also fell an outsized -2.28%

• 72% of the Top 200 companies declined

Announcements

• Qualitas (ASX: QAL) +8.8% secured $440m from a global institutional investor. Proceeds will be used to a residential development project in Sydney

• Centaurus Metals (ASX: CTM) +3.1 reported further strong drill results from resource growth and development drilling at its Jaguar Nickel Sulphide Project in Brazil

• Stanmore Resources (ASX: SMR) +0.9% received FIRB approval to acquire the remaining 20% interest in BHP Mitsui Coal

• Sandfire Resources (ASX: SFR) -0.5% announced that founder Karl Simich will step down as CEO after 15 years. Sandfire’s COO Jason Grace has been appointed as Acting CEO amid an ongoing global executive search 

• Telstra (ASX: TLS) -0.77% the ACCC called for further submissions about the TPG and Telstra network deal

• Commonwealth Bank (ASX: CBA) -2.6% shares fell after APRA removed a $500m capital charge put in place after previous governance and conduct failings

Broker updates

• AGL Energy (ASX: AGL) +3.6% was upgraded to Outperform from Neutral by Credit Suisse with an $8.20 target price. The broker estimates an additional $400m pa to support planned projects to that'll replace coal capacity. Free cash flow is expected to remain solid

• Iress (ASX: IRE) +2.5% was Accumulate rated by Ord Minnett with a $10.80 target price. The broker remains optimistic about the financial services tech industry and about future opportunities in superannuation administration

• Premier Investments (ASX: PMV) -4.8% was Outperform rated by Macquarie following an FY22 report on Thursday that came in ahead of expectations. Sales are expected to come under pressure in FY23, reflected in a lower $29.00 target price, from $35.00.

Quick bites

• The Pound is back to where it was before UK Chancellor Kwarteng announced tax cuts last Friday

Source: Bloomberg

• South Korea slashes chip production for the first time in four years (Bloomberg)

Source: Bloomberg

• China ramps up housing support but analysts say it's not enough (Bloomberg)

Economy

• China’s NBS Manufacturing PMI rose to 50.1 in September from 49.4 in August

  • Ahead of analyst expectations of 49.6

  • The manufacturing industry is in peak season, in which the business purchase index increase to 50.2, according to CN Wire

• China’s NBS Services PMI fell to 48.1 in September from 49.5 in August

  • Below analyst expectations of 52.8

  • Services sentiment has slumped, dragged by retail businesses, catering, accommodation and aviation sectors, according to CN Wire 

Commodities 

Things were pretty quiet for commodity markets, with most commodities up/down less than 1%.

• Iron ore futures on China’s Dalian Commodity Exchange fell -0.1%

Latest news

Post market charts

The market giveth and the market taketh away. 

Thursday’s close was looking a little suspicious as bond yields started to rally back up. The market seems to have come to terms that the Bank of England bond buying program is just a temporary solution to buy pension funds time to raise cash.

I described Thursday’s rally as “a start” because after such a painful ~2 weeks of selling, a strong bounce is only natural. What bulls need is more follow through to help validate the recent low. But amid so much uncertainty and volatility, the market has whipsawed back in the other direction.

S&P/ASX 200: Sold down as the day dragged on. The only positive is that we have yet to undercut June lows. But we’re dangling a little too close for comfort. Volatility remains high and intraday moves tend to be rather outsized.

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

S&P/ASX 200 Discretionary: Sold right the September lows. Perhaps a leading indicator of what to expect from consumers, given the better-than-expected 0.6% Australian retail sales growth in September.

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

S&P/ASX 200 Tech: Similar break down as the Discretionary Index. Thinking out loud here but in previous selloffs (e.g. in January when the market first started to talk about rising interest rates) we witnessed a rotation from growth to value. But now that cash is no longer trash, could there be no rotation?

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

S&P/ASX 200 Financials: So much for higher interest rates driving net interest margin expansion. Banks sold off hard on Friday (well, relative to how they usually move). Seeing some pretty downbeat figures come out of Core Logic around reduced lending capacity and low sentiment to weigh heavily on housing demand.

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

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