The Match Out: ASX produces another green session, Resources drives the rally, ANZ slides on FY22 result

James Gerrish

Market Matters

The ASX punched new 5-week highs again today, now stringing together 4 consecutive days in the green. Even more impressive was that the index rallied without the banks as a disappointed ANZ result weighed on the Financials Sector. Resources strength drove the index today, supported by improving commodity prices and a weakening USD. Focus will turn to the ECB tonight which is expected to raise rates by 75bps, while early 3Q US GDP estimates will also land.

  • The ASX 200 finished up +34pts/ +0.50% at 6845
  • The Energy sector was best on ground (+2.37%), followed by strong gains in Materials (+1.68%) and Industrials (+0.74%)
  • There were just 3 sectors down today, Telcos (-0.44%) the worst, followed by Financials (-0.44%) and a marginal fall by Utilities (-0.08%).
  • Energy caught a bid as US crude stocks rose less than expected overnight. Refiners have managed to boost capacity. However, the crude inventory build was around 2m barrels less than data had previously suggested.
  • ANZ  -3.29%, first read the FY22 result looked like a beat, or at least in line however the delayed take was a negative one. We discuss this further below.
  • Lynas (ASX: LYC) +5.57%, 1Q update from the rare-earths company was weak, but the softness was well flagged. Sales fell 44% and production as down 4% with soft pricing comping for a different product mix. Their key NdPr product is still attracting strong demand and performance will improve as production rebounds after water shortage issues subside – a positive the market focussed on today.
  • Fortescue Metals (ASX: FMG) -0.37%, first quarter was solid from the iron ore miner with record shipments of 47.4mt. The realized price fell to $US87.43/dmt, down more than 19%, however, the discount they receive tightened in the period. Costs were an issue though, up 3% vs the previous quarter despite higher production.
  • Adore Beauty (ASX: ABY) -5.17%, personal care ecommerce company announced negative growth for the first quarter, with revenue down 29% on pcp, though higher than the previous 2 quarters. The launch of a loyalty program, as well as a new mobile app, failed to generate the same sales as COVID lockdowns, however initial signs are positive.
  • Core Lithium (ASX: CXO) -5.15%, said offtake talks with Tesla had concluded without an agreement. Lithium demand remains strong, there’s some concern around the product and deliverability as a result however it’s hard to see them not striking a deal given the tightness of the market.
  • Pinnacle (ASX: PNI) -3.35%, a soft investor update with details around some significant redemptions in their book and an unwillingness from investors to tip money back into equity markets after weakness.
  • Regis Resources (ASX: RRL) +6.85%, a stronger gold market helped, however, Regis also announced a decent quarterly update with 115koz produced at a cost of $1,782/oz. They maintained FY guidance on both costs and production.
  • Iron Ore was ~2.3% lower in Asia today though the miners were largely stronger. BHP the pick of the bunch, up 2.39%
  • Gold edged higher by around 0.3% today to $US1670 at our close.
  • Asian stocks were mixed, Hong Kong and China rallying ~2% but Japan falling -0.25%
  • US Futures are all trading higher by around 0.6% each.

ASX 200 Chart

Weekly Video Update

In this week’s video update James & Harry cover the ANZ result and broader views on the banking sector. They also delve into this week’s high conviction’ report where the Market Matters team picked 3 stocks from each portfolio that are the highest conviction calls here and now. The report is available here.

Watch this week’s video update here

ANZ  $24.99

ANZ -3.29%: the first of the banks to report full-year results this period, ANZ produced a mixed set of numbers with the market focusing on the negatives. Cash NPAT was a slight beat to expectations at $3.4b, as was the final dividend of 74cps however EPS was a miss at $1.09/sh. Margins have been in focus for the banks with IM climbing 10bps to 1.68%, while the exit run rate at the end of the period was a strong 180bps. Costs were the key issue today though with expenses up 1% in the second half while banks have largely been expected to cut costs. The near-term commentary also weighed on the stock today with CEO Shayne Elliot downplaying the first half of FY23. Overall though, the result was solid without shooting the lights out, and recent strength in banks likely played into the weakness seen today.

Broker Moves

  • Codan Cut to Hold at Canaccord; PT A$4.45
  • Codan Cut to Neutral at Macquarie; PT A$4.10
  • Estia Health Raised to Outperform at Macquarie; PT A$2.50
  • Regis Healthcare Raised to Outperform at Macquarie; PT A$2.15
  • Mt Gibson Raised to Neutral at Macquarie; PT 40 Australian cents
  • Lunnon Metals Rated New Outperform at Macquarie; PT A$1.20
  • Medibank Private Cut to Neutral at Citi; PT A$3
  • Cut to Underperform at Credit Suisse; PT A$2.73

Major Movers Today

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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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