Evening Wrap: ASX 200 caps 1% weekly gain as tech, miners and small caps bounce

In a nutshell:

• ASX 200 closed just above its 200-day moving average, capping a 1.0% weekly gain, while the Small Ords (+2.2%) snapped a four-day losing streak

• Tech had its best session since 1 June, led by WiseTech (+8.3%) after ASIC issued no-action letters on its insider trading and governance investigations

• Materials rose 3.3%, recovering most of Thursday’s selloff, while St Barbara (+8.1%) jumped after selling its remaining Simberi stake for ~A$453m

• Carl is back on Monday, so thanks for tuning in over the past two weeks

Let's dive in

• A very strong session, with the ASX 200 gapping up and trading mostly sideways before closing near session highs, just 1 pt above its 200-day moving average. Surprisingly, the index is up 1.0% for the week

• Battered small caps caught a bid, with the Small Ords (+2.2%) snapping a four-day losing streak, though it’s still down 2.8% for the week. The Emerging Companies index also rose 2.2% but is down 4.0% for the week. These are decent oversold bounces, but given both indices have moved lower in a straight line, this is just the beginning of the rebuilding process (or just a dead cat bounce)

• Tech stocks caught an aggressive bid, with the sector recording its best session since 1 June. That said, the Tech index is only just bouncing off a six-month low and is still down 1.5% for the week. A small handful of names are making quite the turn, like WiseTech (+8.3%), which is now above its 50-day moving average and at its highest level since 3 September. On Thursday, ASIC issued no-action letters relating to its insider trading and corporate governance investigations, and the stock has also seen short interest hit a record high of ~11%. The same can’t be said for most other names, where today is simply a slightly larger green candle in what’s been a crushing couple of weeks

• Miners also caught a bid, with the ASX 200 Materials index (+3.3%) recovering most of Thursday’s 3.9% selloff. The index is still down 2.1% for the week, and today’s bounce fell just shy of reclaiming the key 200-day moving average

  • The copper basket traded broadly higher, led by smaller names like Aeris (+5.4%), Kantra (+4.7%), Capstone (+4.4%) and Firefly Metals (+3.6%). Despite all the volatility and softness for copper names, copper is up 0.95% at the time of writing to US$6.68/lb, still within 4% of all-time highs and effectively flat over the last two months

  • Gold stocks were broadly higher, with the All Ords Gold index (+3.99%) bouncing off its 200-day moving average. Notable gainers included St Barbara (+8.1%), which is effectively a cash box after selling its remaining stake in the Simberi Project for ~A$453m (plus a 2.75% net smelter royalty). That leaves it with ~$880m in cash vs a $970m market cap

  • Lithium stocks tried to bounce, but Chinese lithium carbonate futures continued to slip, down 1.6% to 98,940 yuan a tonne. PLS Group (+0.3%) faded hard from a 5.7% session high after approving the final investment decision for its $1.9bn P2000 Project. The intraday selloff was arguably driven by the company carving $650m of capex out of the expansion and labeling it separate “enhancing infrastructure”, which would likely weigh heavily on P2000’s economics if added back in

• Healthcare stocks continued to gain, in line with the S&P 500 Healthcare sector, which rose 1.8% overnight to close at all-time highs. Believe it or not, CSL (+2.8%) is now up 14.6% year-to-date and almost 115% from its 3 June low

• Plenty of yesterday’s winners lagged. Woolworths (-0.1%) slipped after surging 4.2% on Thursday, while CBA (-1.1%) eased after a monster 3.2% rally

• Overall, a constructive day for the index and large caps, but very much an oversold bounce for everything else. Bond yields rolled over following Thursday’s weaker-than-expected unemployment data, with the market-implied probability of an RBA rate hike in November dipping to around 15%, from almost 50% in late September. A December hike is still priced at around 40%

• So where does that leave us? The AI trade has landed in no man’s land after a steep selloff. Korea’s KOSPI is up 3.0% today but still down about 18% over the past seven sessions. As US earnings season ramps up, we’ll soon find out whether any of this has dented the earnings outlook. Locally, the selloff has hit the small and speculative end hardest, along with the miners. It takes a lot of work to feel constructive again (reclaiming key moving averages, rebuilding bases, putting in higher highs and higher lows), so one solid day for the XEC or XSO after a 10-12% fall over the past three weeks is nice, but there’s plenty of work still to do. The macro backdrop isn’t doing equities any favours either. Brent is still sitting at US$105 a barrel, US diesel futures are within 5% of record highs and CPI data isn’t letting up. Let’s see if markets can build today’s bounce into fresh momentum, or whether it turns out to be a dead cat bounce

• Fed Chair Warsh spoke in Bangkok this afternoon, at the IMF-World Bank Annual Meeting

  • October hike odds fell to about 17% from roughly 30% while Warsh was speaking, ahead of the Fed’s 27-28 October meeting

  • Warsh said the global economy has broadly tracked the Fed’s expectations since September’s hike, but declined to flag his next move, saying “I don’t prejudge meetings”

  • On AI, Warsh said he’s optimistic it will make economies that use it well more productive and wealthier, though he expects a rocky path and an unclear near-term hit to jobs

  • Warsh also flagged that AI will reshape how the Fed conducts monetary policy