Market Wraps

Evening Wrap: ASX 200 breakeven as inflation eases in March, MinRes and lithium stocks tumble

Wed 26 Apr 23, 4:25pm (AEST)

ASX 200 futures are trading 38 points lower, down -0.52% as of 8:20 am AEDT.

Australia's inflation eases to 6.3% in March from 6.8% in February, the ASX 200 whipsaws from a steep decline to a breakeven close, iron ore prices brief hit a five month low of US$100.55 a tonne and brace yourself for a wild overnight session as the US market takes on board resilient earnings from Microsoft and Alphabet.

Let's dive in.


Today in Review

Wed 26 Apr 23, 4:19pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,316.3 -0.08%
All Ords 7,502.8 -0.13%
Small Ords 2,885.7 -0.34%
All Tech 2,272.0 -0.46%
Emerging Companies 2,123.3 -0.07%
Currency
AUD/USD 0.6608 -0.28%
US Futures
S&P 500 $4,112.5 +0.47%
Dow Jones $33,705.0 +0.16%
Nasdaq $12,980.75 +1.34%
Name Value % Chg
Sector
Energy 10,691.5 +0.88%
Industrials 6,951.9 +0.82%
Communication Services 1,558.9 +0.39%
Real Estate 3,124.5 +0.14%
Health Care 44,893.6 +0.01%
Consumer Discretionary 3,102.1 0.00%
Consumer Staples 13,650.6 -0.01%
Financials 6,329.0 -0.05%
Information Technology 1,577.4 -0.37%
Materials 17,899.3 -0.71%
Utilities 8,529.3 -1.12%

Enjoying the Evening Wrap? Sign up to get it sent directly to your inbox after every trading day.

ASX 200 Session Chart

ASX 200 intraday
A very volatile intraday session (Source: Market Index)

Markets

What a wild session. The ASX 200 was quick to fall to session lows of -0.54% but a cooler-than-expected inflation print at 11:30 am AEST triggered a snapback rally back up to breakeven. The market then sold off again around 2 pm before rallying back up to breakeven in the last hour of trade. Huh?

Volatility is starting to pick up amid mixed views about the RBA's path and key US earnings. The US market has been relatively rangebound over the past 2-3 weeks, so earnings could be a key directional driver heading into May. As for the ASX 200, we've underperformed due to a sharp pullback for Resources.

  • Materials continue to sell off amid weakening iron ore prices, which briefly hit US$100.55 a tonne on Wednesday as well as sharp declines from large cap lithium miners

  • Tech traded around breakeven, balancing a 2% decline for a Nasdaq overnight but better-than-expected after hours results from Alphabet and Microsoft

  • Defensive sectors including Industrials, Telcos and Staples outperformed

Economy

Australia’s consumer price index was up 6.3% year-on-year in March from 6.8% in February.

  • Beat market expectations of 6.5%

  • Inflation in the first quarter was up 7.0% year-on-year, down from 7.8% in the previous quarter and largely in-line with market expectations of 6.9%

  • “CPI inflation slowed in the March quarter, with the quarterly rise being the lowest since December 2021. While prices continued to rise for most goods and services, many of these increases were smaller than they have been in recent quarters.” – Michelle Marquardt, ABS Head of Price Statistics


Market Insights

Iron ore: From US$120 to US$100 in just two weeks

Iron ore prices have pulled back sharply as China's post re-opening momentum begins to wane across key real estate and steelmaking industries.

On Tuesday, the Vice Chairman of the China Iron and Steel Association said the domestic real estate industry has not shown a clear uptrend in recovery and no significant driving force for a large increase in steel demand.

The Association said steel demand in infrastructure and manufacturing sectors was stable in March while demand in real estate continued to fall further.

On Thursday, the Association called on steel mills to take the initiative to reduce production to "safeguard the stable operations of the steel market." This follows a sharp decline in domestic steel prices and seeks to help steelmakers avoid wasting cash flows on finished product inventories.

Iron ore futures
Singapore iron ore futures (Source: TradingView)

Mega cap tech stocks: AI and Cloud

The Nasdaq fell 2% overnight but futures rallied after better-than-expected earnings from Alphabet (+1.7% after hours) and Microsoft (+8.5% after hours). This also bumped up the after hours performance of Amazon (+4.4%), Meta (+2.3%) and other tech names.

It's a rather interesting dynamic: Is the market selling off ahead of major results (a reason to de-risk). And consequently, are shorts getting added?

On the plus side, these major tech names are all heavily exposed and reliant on cloud growth, to which both tech heavyweights posted some rather resilient numbers:

  • Microsoft Azure: Revenue +27% year-on-year to US$22bn

  • Google Cloud: Revenue +28% year-on-year to US$7.5bn

Still, commentary was rather soft, with Google CFO Ruth Porat saying "we continued to see slower growth of consumption as customers optimised GCP costs, reflecting the macro backdrop, which remains uncertain."


Interesting news and movers

Trading higher

  • +19.4% ImpediMed (IPD) – Momentum, up 29.2% in previous three

  • +17.2% Marley Spoon (MMM) – Business combination agreement

  • +7.2% Kogan (KGN) – Business update and share buy-back

  • +3.8% Pacific Smiles (PSQ) – Earnings

  • Gold sector move: Gold Road (+4.7%), Evolution (+3.5%), Newcrest (+1.7%)

Trading lower

  • -26.5% Synlait Milk (SM1) – Downgraded guidance

  • -11.6% Mesoblast (MSB) – Capital raising

  • -8.8% Mineral Resources (MIN) - March quarter update

  • -3.6% Bluescope Steel (BSL) – Downgraded by JPMorgan

  • -3.4% Hastings Technology (HAS) – Earnings

  • -2.4% Weebit Nano (WBT) – Earnings

  • Lithium sector move: Pilbara Minerals (-5.9%), Allkem (-3.4%)


Broker updates

Macquarie notes:

Brambles (BXB): Neutral with $13.70 target price

  • “We raise FY23 constant-FX forecasts to fall within new guidance noting that around 45% of the upgrade relates to cost deferral benefits.”

  • “Revenue drivers are turning; whilst competition is rational, we are seeing deflation on logistics and lumbers and pallet availability is improving.”

  • “We see valuation as fair on 19x FY24 P/E, trading in line with the ASX 300 industrials. This already implies a re-rate to recent trends.”

Fortescue Metals (FMG): Underperform with $17.00 target price

  • “FMG’s 3QFY23 result was solid with volumes and realised prices in line with our estimates and cash costs lower than we had forecast.”

  • “Two 300MW green hydrogen and green ammonia projects are advancing in Norway in Kenya, however details remain elusive.”

  • “FMG is trading on modest free cash flow yields of 6-8% and with uncertainty over the capital commitment to FFI we retain our Underperform rating.”

South32 (S32): Outperform with $4.80 target price

  • “S32’s 3QFY23 result was weak with most operations reporting production below our expectations.”

  • “S32 has cut production guidance for five operations for FY23, which has translated into material cuts to our earnings forecasts.”

  • “The stock is trading on free cash flow yields of 11-12% for FY24-FY25 at spot prices, and we reiterate our Outperform rating.”

Goldman Sachs notes:

Telstra (TLS): Buy with $4.70 target price

  • “We continue to believe consensus mobile forecasts look conservative, and now sit +3% ahead of FY24 postpaid ARPUs.”

  • “We expect updated mobile pricing expected to be announced in coming weeks (to give sufficient notice to the Jul-23 introduction), which should be positively received.”

Whitehaven Coal (WHC): Neutral with $7.80 target price

  • “WHC reported a weak March Q result with saleable coal production of 3.7Mt below our 4.5Mt estimate.”

  • “Guidance implies a decent step-up in production in the June Q, which will be driven by the move of the Narrabri longwall to the shallower southern part of the mine, and a recovery at Maules Creek.”

  • “The (thermal coal) market was in a ~40Mt deficit in 2H22, but that the market should rebalance by mid-2023 on recovering supply from Australia, ongoing high supply from Indonesia, steady Russian exports, and lower demand from the slowing global economy and seasonal factors.” 


Scans

Top Gainers

Code Company Last % Chg
ODA Orcoda Ltd $0.27 +28.57%
W2V Way 2 Vat Ltd $0.014 +27.27%
YAR Yari Minerals Ltd $0.022 +22.22%
JAY Jayride Group Ltd $0.145 +20.83%
ADC Acdc Metals Ltd $0.12 +20.00%
View all top gainers

Top Fallers

Code Company Last % Chg
8IH 8I Holdings Ltd $0.045 -31.82%
SM1 Synlait Milk Ltd $1.445 -26.28%
NGS Nutritional Growt... $0.016 -20.00%
CCR Credit Clear Ltd $0.225 -19.64%
OMA Omega Oil & Gas Ltd $0.225 -18.18%
View all top fallers

52 Week Highs

Code Company Last % Chg
ODA Orcoda Ltd $0.27 +28.57%
IPD Impedimed Ltd $0.18 +16.13%
EBR EBR Systems Inc $0.80 +9.59%
CXM Centrex Ltd $0.195 +8.33%
RXH Rewardle Holdings... $0.027 +8.00%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
SM1 Synlait Milk Ltd $1.445 -26.28%
NGS Nutritional Growt... $0.016 -20.00%
CCR Credit Clear Ltd $0.225 -19.64%
NXM Nexus Minerals Ltd $0.14 -17.65%
MPP Metro Performance... $0.15 -14.29%
View all 52 week lows

Near Highs

Code Company Last % Chg
FLT Flight Centre Tra... $19.37 +0.94%
BILL Ishares Core Cash... $100.56 +0.02%
SLA Silk Laser Austra... $3.02 +0.33%
ORI Orica Ltd $16.11 -0.25%
CWP Cedar Woods Prope... $4.84 -0.21%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
NVX Novonix Ltd $0.90 -3.74%
BRN Brainchip Holding... $0.385 -4.94%
WAX Wam Research Ltd $1.19 +0.85%
EM2 Eagle Mountain Mi... $0.12 -4.00%
BOQ Bank of Queenslan... $5.955 -1.08%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

Get the latest news and insights direct to your inbox

Subscribe free

Get free post-market insights with our Evening Wrap

Create an account to receive our concise, data-driven post-market recap, sent directly to your inbox, every day.

Along with the Evening Wrap, you'll join 100k+ investors who receive our Morning Wrap and Weekend Newsletter.