The Match Out: Resources underpin ASX strength, Westpac (WBC) falls despite solid result

James Gerrish

Market Matters

Futures were pricing a significantly higher open (~90pts) this morning and what we got was fairly lacklustre, particularly outside the commodity complex. Reconfirmation leaking from China that Covid zero policies were not being relaxed as previously implied had US Futures on the back foot which took some cream off the recovery locally. Still, we managed to rally ~50pts (stripping out the impact of dividends) with Material stocks a major beneficiary of a strong move higher in the likes of Copper, Nickel & Gold on Friday night.

  • The S&P/ASX 200 added +41 points / +0.60% to close at 6933
  • Materials (+3.71%) were the standout with support coming from Energy (+1.35%)
  • IT (-2.17%) & Financials (-1.43%) were weak.
  • While the market was clearly not as bullish as it could have been, what we saw on Friday to MM suggests we’ve seen a turning point in the important $US – further weakness in this very crowded trade is very bullish for commodities.
  • BHP Group (ASX: BHP) +4.98% led commodity stocks higher following a big move in Copper & other metals on Friday.
  • Gold stocks also in the cross hairs benefit from a strong bullion price rebound. Newcrest (ASX: NCM) +4.20%, St Barbara (SBM) +3.09% & Evolution (EVN) +6.97%
  • Coronado Coal (CRN) -7.05% fell after calling off discussions with Peabody (BTU US) – the pair were looking at a merger.
  • China’s exports in October dropped 0.3% from a year earlier, while imports shrank 0.7%, both missing expectations. The pressure continues to build on China from an economic standpoint. T
  • Westpac (ASX: WBC) -3.91% fell after reporting inline FY results, ANZ traded Ex-dividend.
  • The Aussie Dollar was lower today following +3% move higher on Friday, trading 64.26c around our close. We think the AUD rallies from here In line with commodities.
  • Gold was trading lower during the Asian session ticking around $US1672/oz at our close.
  • Asian stocks were up, Hang Seng bounced +2.91%, the Nikkei in Japan was up +1.3%, while China rallied 0.42%
  • US Futures are marginally lower

ASX 200 Chart

Westpac (WBC) $23.19

WBC -3.91%: Was lower today following their FY results that were in line with expectations. Cash profit of $5.3 billion was down 1% vs 2021 but in line with consensus while the dividend of $1.25 beat by 2%. Costs were a focus and these were revised up for FY24 to $8.6b (+$600m on prior guidance) given the impacts of higher inflation including wage increases from a tight labour market and continuing regulatory spend. This is perhaps the reason for the market sell-off although we would argue this was a ‘known known’ and should not have come as a big surprise. Looking at core operating trends, the results were very solid, business banking a highlight while John Storey at UBS made a good point around whether or not the new cost guidance is credible – perhaps concern around that played into weakness.

Banks have a good handle on broad economic trends, and some comments from CEO Peter King stood out…“If I step back to the macroeconomy, it’s just really strong. We went through a period where businesses didn’t want to put up their prices because they were worried about losing market share. Now we’re in an environment where they are putting up prices and spending is still staying pretty high. And so, the Reserve Bank’s got a pretty tricky trade-off.

Coronado Global Resources (ASX: CRN) $2.11

CRN -7.05%: shares in the coal miner were on the back foot today after announcing potential takeover talks with US giant Peabody had ended without a proposal. While there was no reason provided, Peabody has recently taken issue with Queensland’s royalty tax changes, while Coronado’s lack of thermal coal was also thought to be a sticking point. Coronado announced plans to move back into thermal coal with the CEO talking up the long-term price support, currently trading at a premium to coking coal.

Broker Moves

  • No changes today.

Major Movers Today

Enjoy your night
The Market Matters Team

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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