Evening Wrap: ASX 200 closes flat, CBA shares bounce, lithium stocks smashed

The S&P/ASX 200 closed 5 points higher, up 0.06%.

The market is trying to find its footing after a volatile week, the big four banks finally bounce after three consecutive days of selling, lithium stocks sell off sharply and Citi's take on today's results.

Let's dive in.

ASX 200 Session Chart

Choppy session but the ASX 200 managed to settle around breakeven (Source: TradingView)

Markets

Banks helped offset declines from almost every other sector. The market remains rather heavy as the session was just one heavyweight and oversold sector offsetting from the others. The ASX 200 remains in a volatile state, trying to stabilise after a volatile week where it fell 0.96%.

• Financials bounced after the sector fell -4.3% last week. Most of the big four banks bounced around ~1%

• Energy led to the downside after oil prices fell -1.9% last Friday, down for a fifth consecutive session

• Yield sensitive sectors including Real Estate, Utilities and Telcos were under pressure. The Australian 2-year yield has hit levels not seen since last October

Economy

No major economic announcements. This to look out for this week include:

• Tuesday: RBA Meeting Minutes

• Thursday: FOMC Minutes

Latest news

Market Insights

ASX 200: Still heavy

The market remains in a heavy state. Banks are bouncing from a rather oversold state, if not for them, the market would've been red.

We're seeing some of the bearish talking points begin to matter such as rising bond yields, repricing of peak interest rates for central banks, bullish sentiment beginning to fade and short-covering coming to an end (Goldman Sachs notes a 12-day short-covering period earlier this month which was the second largest in the past decade).

Now represents a lull period where the dust is trying to settle, but the question is where?

From a technical perspective, can the market catch a bid around the 50-day? However, as the 20-day begins to turn negative, does it become one of those instances where it struggles to reclaim the 20 and rides it all the way down?

XJO chart (Source: TradingView)

Nice narrative, ugly chart

Much loved sectors like lithium and uranium are getting absolutely punched in the face.

A bellwether name for lithium like Pilbara Minerals has been trying to hold this key $4.74 level. But broke down rather aggressively.

Pilbara Minerals price chart (Source: TradingView)

Interesting news and movers

Trading higher

• +11.7% Inghams (ING) – Upgraded by several brokers

• +7.9% Weebit Nano (WBT)

• +7.8% Talga Group (TLG)

• +5.5% Ridley Corp (RIC) – Continuation rally, up more than 14% in last three

• +3.4% Kelsian Group (KLS) – Sydney bus contract award

• +1.9% De Grey Mining (DEG) – The Australian notes takeover speculation

Trading lower 

• -18.1 CogState (CGS) – Major shareholder selldown

• -13.95% Piedmont Lithium (PLL) – LC Chem investment and offtake

• -11.6% NIB Holdings (NHF) – Reports 1H earnings

• -10% BlueScope Steel (BSL) – Reports 1H earnings

• -6.1% Charter Hall (CHC) – Reports 1H earnings

• -5.4% Pilbara Minerals (PLS) – Spot sale pricing

• -5.6% Macmahon Holdings (MAH) – Reports 1H earnings

• -5.5% GWA Group (GWA) – Reports 1H earnings

• Lithium sector move: Argosy (-6.2%), Leo Lithium (-6.1%), Core Lithium (-4.2%), Liontown (-4.1%), Allkem (-3.4%)

• Uranium sector move: Paladin Energy (-5.9%), Boss Energy (-5.6%), Deep Yellow (-3.5%)

Broker updates 

Citi's take on today's results:

A2 Milk (A2M): Sell rated with $4.51 target price

• Result was broadly in-line or better-than-expected, notably infant formula sales growth (+18%), strong China brand health metrics and improved US segment losses

• Valuation came into question, now trading at 39x FY23 PE. Citi also flagged a potential write off for A2 inventory ahead of the SAMR registration deadline

Charter Hall Group (CHC): Buy with $14.50 target price

• EPS came in 11% ahead of Citi expectations (50.7 cents vs. 45.7 cents). Though, FY23 EPS guidance at "no less than 90 cents" implies a -24% decline in the second-half vs. the first half

• "The stock has had a strong run coming in to today’s result, so we expect a negative reaction to the guidance being left unchanged."

BlueScope Steel (BSL): Buy with $19.50 target price

• "North Star ramp-up going well; expectations continue to be that the full ramp-up will progress over an 18-month period from August 2022."

• "Group underlying EBIT in 2H FY23 is expected to be in the range of $480m-$550m. This is lower than 1H FY23 mainly due to softer Asian and Midwest steel spreads."

GPT Group (GPT): Buy with$4.90 target price

• FY22 FFO was slightly below consensus expectations, office valuation reduced by 5%

• "FY23 FFO guidance of 31.3cps is slightly ahead of consensus of 30.9cps. Given the relatively cheap valuation we expect the share price likely to remain relatively supported today to the rest of the sector."

Scans