Evening Wrap: ASX 200 closes at record levels, South32 and Fortescue rally, Real Estate stocks break out

The S&P/ASX 200 closed 56 points higher, up 0.66%.

In a nutshell:

• ASX 200 topped its 11 June high to close at record levels

• Participation was broad, with the move supported by resources and defensives (as opposed to the usual suspects like banks and tech)

• Australian retail sales bounced less than expected, while industrial activity remained weak

Let's dive in.

ASX 200 Session Chart

ASX 200 higher, closing 56 points up (Source: Market Index)

Markets

• ASX 200 topped its 11-Jun high to mark the sixth record high of the year

• Unlike previous sessions (fading strength or bouncing off lows), price action rather decisive, with the market trending higher to close near best levels

• Participation was broad, with ten out of 11 sectors green and 139 S&P/ASX 200 constituents (70%) closing higher

• Materials (+1.83%) fuelled the record move, sector continues to bounce from two-month lows just seven sessions ago. Notable gainers include South32 (5.0%) and Fortescue (+3.8%)

• Real Estate (+1.77%) showing signs of strength, with some analysts now expecting four RBA rate cuts by year end, supporting REIT valuations. A large cap name like Scentre Group (+2.7%) is breaking out to September 2024 highs

• Tech sector (-0.73%) unsurprisingly struggled as investors rotated out of last FY's winners. The same shift took place overnight, as the Dow (+0.91%) gained while the Nasdaq (-0.82%) slipped

• Overall, the market is trading at relatively expensive multiples (fwd multiple of approx 19x or two standard deviations above its historical long-term average of 14.7x, according to Morgan Stanley)

• But the path of least resistance is arguably higher, as the market begins to develop a clearer rate cut outlook. Interesting to see the market hit record levels without the help of financials (+0.02%)

• Though the market may see some volatility amid Trump's "One Big Beautiful Bill" (which passed the Senate last night) and trade deal volatility (possible deal with India, Japan deal facing some push back, White House may settle for phased deals or agreements in principle)

Economy

Australia's AI Group Industry Index fell slightly to -11.9 in June, from -12.3 May. Key highlights from the report (which observes Aussie industrial activity) include:

• Supply side factors eased as input costs and average wages declined, pointing to continued softening of inflationary pressures.

• Demand side weakness continued, as new orders dropped while sales remain subdued, with manufacturers particularly affected.

• Business services continued to lift and rose to the best result in two years. Construction has been slowly recovering since mid-2024 amid a strong pipeline of historical work.

Australian retail sales rose 0.2% month-on-month in May vs. consensus for a 0.4% gain but up from no growth in April. Key takeaways from the ABS include:

• Clothing, footwear and personal accessory retailing (+2.9 per cent) and department stores (+2.6 per cent) were the only industries to see rises, both bouncing back from large falls in April.

• Food-related spending fell for the first time this year. Food retailing (-0.4 per cent) drove the fall, while spending in cafes, restaurants and takeaway food services was flat (0.0 per cent).

Latest News

Interesting Movers

Trading higher

• +8.53% Perpetual (PPT) – UBS upgrade

• +8.15% Platinum Asset Management (PTM) – UBS upgrade

• +7.41% Aft Pharmaceuticals (AFP) – No news

• +7.11% Magellan Financial Group (MFG) – Target price raised by UBS

• +5.39% South32 (S32) – Jefferies upgrade, aluminium price also edging higher to two-month high of US$2,600

• +5.08% James Hardie Industries (JHX) – Completes AZEK acquisition

Trading lower

• -20.80% Healia Group (HLI) – ING seeks alternative provider, accounted for ~17% of gross written premiums

• -15.32% Dominoes Pizza Enterprises (DMP) – CEO resigned after less than one year

• -9.24% Mesoblast (MSB) – Pullback after rallying ~14% in last three sessions

• -7.69% MTM Critical Metals (MTM) – No news

• -4.98% Zip Co (ZIP) – Broader tech weakness

Broker notes

AIC Mines (A1M)

• Retained at Buy at Shaw and Partners; Price Target: $0.70 from $1.10

Aussie Broadband (ABB)

• Initiated at Outperform at Macquarie; Price Target: $5.05

Abacus Group (ABG)

• Retained at Accumulate at Ord Minnett; Price Target: $1.20

Adairs (ADH)

• Retained at Hold at Bell Potter; Price Target: $2.15 from $2.10

AMP (AMP)

• Retained at Neutral at UBS; Price Target: $1.35 from $1.21

• Retained at Neutral at UBS; Price Target: $1.35 from $1.21

Arena REIT (ARF)

• Retained at Buy at Ord Minnett; Price Target: $4.30

Abacus Storage King (ASK)

• Downgraded to Hold at Ord Minnett; Price Target: $1.55 from $1.49

AUB Group (AUB)

• Retained at Neutral at UBS; Price Target: $36.00 from $33.30

Accent Group (AX1)

• Retained at Buy at Bell Potter; Price Target: $1.90 from $2.10

Aurizon Holdings (AZJ)

• Upgraded to Outperform from Neutral at Macquarie; Price Target: $3.39

Biome Australia (BIO)

• Retained at Buy at Bell Potter; Price Target: $0.84 from $0.85

Bravura Solutions (BVS)

• Retained at Buy at Shaw and Partners; Price Target: $2.90

Charter Hall Group (CHC)

• Retained at Hold at Ord Minnett; Price Target: $19.00 from $15.00

Centuria Industrial REIT (CIP)

• Downgraded to Hold from Accumulate at Ord Minnett; Price Target: $3.10

Centuria Capital Group (CNI)

• Retained at Accumulate at Ord Minnett; Price Target: $1.85 from $2.00

Computershare (CPU)

• Retained at Neutral at Macquarie; Price Target: $38.00 from $35.00

Charter Hall Social Infrastructure REIT (CQE)

• Retained at Buy at Ord Minnett; Price Target: $3.35 from $3.20

Corporate Travel Management (CTD)

• Downgraded to Hold from Buy at Jefferies; Price Target: $14.20

Dexus (DXS)

• Upgraded to Accumulate from Hold at Ord Minnett; Price Target: $7.20 from $7.40

Greatland Resources (GGP)

• Upgraded to Outperform at Macquarie; Price Target: $8.40 from $7.80

Goodman Group (GMG)

• Retained at Hold at Ord Minnett; Price Target: $32.50 from $30.80

Growthpoint Properties Australia (GOZ)

• Retained at Accumulate at Ord Minnett; Price Target: $2.40 from $2.60

GPT Group (GPT)

• Retained at Accumulate at Ord Minnett; Price Target: $5.15 from $5.10

GQG Partners Inc. (GQG)

• Retained at Buy at UBS; Price Target: $2.85 from $2.80

• Retained at Buy at UBS; Price Target: $0.85 from $2.80

HMC Capital (HMC)

• Upgraded to Buy from Hold at Ord Minnett; Price Target: $6.00 from $9.15

Harvey Norman Holdings (HVN)

• Retained at Buy at Bell Potter; Price Target: $6.00

Insurance Australia Group (IAG)

• Retained at Buy at Citi; Price Target: $10.00

• Retained at Neutral at Goldman Sachs; Price Target: $8.30

• Retained at Neutral at Jarden; Price Target: $8.40 from $8.00

• Retained at Overweight at JPMorgan; Price Target: $8.90

• Retained at Neutral at Macquarie; Price Target: $8.70

• Retained at Neutral at UBS; Price Target: $9.30

Insignia Financial (IFL)

• Retained at Buy at UBS; Price Target: $4.60 from $4.50

JB Hi-Fi (JBH)

• Retained at Buy at Bell Potter; Price Target: $114.00

Kogan.com (KGN)

• Retained at Hold at Bell Potter; Price Target: $4.10 from $4.50

LendLease Group (LLC)

• Retained at Hold at Ord Minnett; Price Target: $5.85 from $6.20

Lovisa Holdings (LOV)

• Retained at Hold at Bell Potter; Price Target: $31.00 from $30.00

Magellan Financial Group (MFG)

• Retained at Buy at UBS; Price Target: $9.50 from $9.40

Mirvac Group (MGR)

• Retained at Hold at Ord Minnett; Price Target: $2.15

Minerals 260 (MI6)

• Initiated at Speculative buy at Morgans; Price Target: $0.26

Medibank Private (MPL)

• Downgraded to Neutral from Buy at UBS; Price Target: $5.45 from $5.10

• Retained at Buy at UBS; Price Target: $5.45 from $5.10

Motorcycle Holdings (MTO)

• Retained at Buy at Morgans; Price Target: $4.10 from $2.75

National Storage REIT (NSR)

• Retained at Accumulate at Ord Minnett; Price Target: $2.30 from $2.40

Oohmedia (OML)

• Retained at Outperform at Macquarie; Price Target: $2.00

Paradigm Biopharmaceuticals (PAR)

• Retained at Speculative buy at Bell Potter; Price Target: $0.73

• Retained at Buy at Bell Potter; Price Target: $0.73 from $0.80

Premier Investments (PMV)

• Retained at Buy at Bell Potter; Price Target: $26.50 from $29.00

Pinnacle Investment Management Group (PNI)

• Retained at Neutral at UBS; Price Target: $21.70 from $19.50

Perpetual (PPT)

• Upgraded to Buy from Neutral at UBS; Price Target: $22.50 from $18.50

• Upgraded to Buy from Neutral at UBS; Price Target: $20.50 from $18.50

Platinum Asset Management (PTM)

• Retained at Sell at UBS; Price Target: $0.47 from $0.50

• Upgraded to Neutral from Sell at UBS; Price Target: $0.47

QBE Insurance Group (QBE)

• Downgraded to Neutral from Outperform at Macquarie; Price Target: $23.00 from $23.41

• Retained at Buy at UBS; Price Target: $26.00 from $24.65

Retail Food Group (RFG)

• Retained at Buy at Bell Potter; Price Target: $3.60 from $4.00

Region Group (RGN)

• Retained at Accumulate at Ord Minnett; Price Target: $2.25

Scentre Group (SCG)

• Retained at Accumulate at Ord Minnett; Price Target: $3.70 from $3.63

Steadfast Group (SDF)

• Retained at Buy at UBS; Price Target: $6.85 from $6.70

Sheffield Resources (SFX)

• Retained at Hold at Ord Minnett; Price Target: $0.20

Stockland (SGP)

• Retained at Hold at Ord Minnett; Price Target: $5.35 from $4.95

Superloop (SLC)

• Upgraded to Outperform at Macquarie; Price Target: $3.30

Santana Minerals (SMI)

• Retained at Speculative buy at Canaccord Genuity; Price Target: $1.40 from $1.56

Step One Clothing (STP)

• Retained at Buy at Bell Potter; Price Target: $1.30

Suncorp Group (SUN)

• Retained at Overweight at JPMorgan; Price Target: $21.70 from $21.70

• Downgraded to Hold from Accumulate at Ord Minnett; Price Target: $22.00 from $21.00

• Retained at Neutral at UBS; Price Target: $22.50 from $21.65

Seven West Media (SWM)

• Retained at Neutral at Macquarie; Price Target: $0.18

Temple & Webster Group (TPW)

• Retained at Hold at Bell Potter; Price Target: $22.00 from $21.00

Universal Store Holdings (UNI)

• Retained at Buy at Bell Potter; Price Target: $10.50

Vicinity Centres (VCX)

• Retained at Accumulate at Ord Minnett; Price Target: $2.55 from $2.35

Virgin Australia Holdings (VGN)

• Downgraded to Hold from Outperform at CLSA; Price Target: $3.19 from $3.24

Zip Co (ZIP)

• Downgraded to Underperform from Hold at Jefferies; Price Target: $2.10 from $1.80

Scans