Evening Wrap: ASX 200 bounces, nickel stocks rally on Mincor takeover, RBA considers a pause in April

The ASX 200 bounces but spent most of the day drifting down from session highs, the RBA reconsiders the case for a pause in April, Mincor receives a $760 million takeover bid which sends nickel stocks higher and the market's fast approach a bullish period (from a seasonality perspective).

Let's dive in.

ASX 200 Session Chart

ASX 200 rallies 1.35% in early trade and closes off session highs at 0.82% (Source: Market Index)

Markets

Another uneventful day where we bounced from oversold levels. The ASX 200 was up 1.35% in early trade and slowly drifted lower to a 0.82% close. The market remains in a vulnerable and volatile place, on top the Fed's interest decision on Thursday.

• Discretionary stocks bounced the most, led by Domino's Pizza (+6.0%), Aristocrat Leisure (+1.8%( and Wesfarmers (+1.7%)

• Financials were higher but closed off session highs of 1.87%

• Utilities underperformed led by names like Meridian Energy (-4.1%) and Origin Energy (-2.0%)

Economy

RBA monetary policy meeting highlights:

• A pause is brewing: "Members agreed to reconsider the case for a pause at the following meeting, recognising that pausing would allow additional time to reassess the outlook for the economy."

• Assessing the effect of hikes: "Members noted that monetary policy was in restrictive territory and that the economic outlook was uncertain. These considerations meant that it would be appropriate at some point to hold the cash rate steady, to assess more fully the effect of the interest rate increases to date."

• Growth slows: "Economic growth had slowed to a below-trend rate in the December quarter 2022, and overall private demand had declined. Early indicators suggested that sluggish growth in demand had continued into the March quarter."

• Oil prices down, energy prices elevated: "Energy prices had declined to the levels of early 2022 – before Russia’s invasion of Ukraine ... Nevertheless, energy prices remained around two to three times higher than in pre-pandemic years."

Latest news

Market Insights

Goodbye Mincor

Mincor (ASX: MCR) received an on-market takeover bid from Wyloo Metals at a price of $1.40 per share or a 34.6% premium to its last close.

“We are in a world where the adoption of electric vehicles and industrial decarbonisation continues to increase demand for high-grade nickel sulphides," said Mincor CEO Gabrielle Iwanow.

"The grade, location, metallurgy and exploration upside of Mincor’s Kambalda nickel sulphide assets mean that they are highly strategic for industry players ... As Mincor approaches full ramp-up in mining, and continues to pursue its highly prospective exploration opportunities, we believe that this strategic value will continue to grow.”

This has inspired a broad-based rally for nickel pure plays including Nickel Industries (+2.3%), Centaurus Metals (+6.9%) and Panoramic Resources (+8.0%).

After IGO (ASX: IGO) acquired Western Areas in June 2022, the ASX-listed nickel scene (at least towards the larger end of town) is starting to look pretty barren.

March seasonality

We're fast approaching the second best (first being the Santa rally) period for equities.

S&P 500 seasonality (based on the past 30 years of performance) shows that the S&P 500 tends to gain around 3% over the next 50 trading days, through to mid May.

Is there too much drama going on right now for seasonality to kick on? Or do we see a bit of a relief rally in the near-term?

Source: SentimenTrader

Interesting news and movers

Trading higher

• +42.3% Mincor (MCR) – $1.40 takeover bid

• +11.9% Mader Group (MAD)

• +11.4% Challenger Exploration (CEL) – Gold drilling results

• +8.6% New Hope (NHC) – Earnings

• Nickel sector move: Panoramic Resources (+8.0%), Centaurus Metals (+6.9%)

• Coal sector move: Stanmore (+3.9%), Yancoal (+3.7%) and Whitehaven Coal (+3.6%)

• Financials sector move: AMP (+5.1%), Macquarie Group (+3.3%), Perpetual (+3.2%)

Trading lower

• -15.4% 88 Energy (88E)

• -7.7% Jervois Global (JRV) 

Broker updates

Macquarie on the Australian Energy Sector:

• “AEMO warned again of gas market vulnerability this winter – with BOM forecasting milder winter weather; generator reliability will be swing factor.”

• The note flagged how domestic gas demand is entering a structural decline, with CAGR of -1.7% through to 2023. But at the same time, supply is declining faster due to the lack of investment in supply.

• Santos remains the top pick with an Outperform rating

• Cooper Energy could be a major beneficiary of gov’t policy clarify but remains Neutral rated

• Beach Energy has seen “value .. emerging since the result” but remains Neutral rated 

Macquarie on industrials:

• “Markets are expected to remain volatile. This favours a relatively more defensive stock allocation from a top-down perspective.” 

• “Our analysis suggests that across our general industrials coverage, AMC, NUF, ORI, GNC and CGC should perform relatively better during periods of higher volatility.”

• “Strongest balance sheets sit with MND, IPL, GNC, ELD, VNT and ORI.”

Goldman on ASX tech:

• ASX tech companies “generally reported in-line 1H23 results” and key themes that emerged include: 1) Demand remains strong, 2) Margin pressures abating, 3) Cost rationalisation programs were not a widespread feature, unlike the US, 4) Supply chains are expected to ease through 2023 and 5) Unit economics movements were solid

• Goldman reiterated top picks, broken down into two categories

• First were more “offensive” names that are moving to free cash flow profitability, including Xero and Life 360

• Second were profitable names with “resilient end-markets and visibility to consensus upgrades” including REA Group, Data#3 and Macquarie Telecom

Goldman on Telcos:

• “Following an extended period of declining revenues, the ANZ telecom sector returned to positive top-line growth in 1H23.” 

• “We remain bullish on near-term mobile revenues following 1H23 results and mgmt. meetings, underpinned by ongoing price rises, roaming and accelerating subscriber growth.”

• Reiterated a Buy rating for Telstra but Sell for Spark 

Scans