Evening Wrap: ASX 200 closes flat, lithium stocks slide, US futures higher

The S&P/ASX 200 closed 5 points lower, down -0.07%.

The ASX 200 closed around breakeven with declines from Real Estate and Resources offset by gains from Banks, Tech and Health Care, Japan's GDP unexpectedly contracts in Q3, RBA minutes point towards a potential pause in rate hikes and lithium stocks fall in Goldman Sachs and Citi notes.

Let's dive in.

Markets

A rather uneventful day for the ASX 200.

• Technology surprisingly led to the upside despite the Nasdaq falling -1.1% overnight. Heavyweights Wisetech, Computershare, Xero and Altium rose bewteen 1-2.5%

• Healthcare also stood out thanks to a 1.5% gain from CSL

• Real Estate fell the most, losing steam after a 3.9% rally last Friday

• Materials and Energy also weaker after China released a series of disappointing economic data

• 103 of the top 200 advanced (52%)

Economy

Japanese Q3 GDP growth unexpectedly contracts, down -0.3% compared to 1.1% in Q2.

• Well-below consensus expectations of 0.3% growth

• The decline was mainly due to a surge in imports, with consumption, capital expenditure and exports still in positive territory

The RBA minutes raised the possibility of a pause in hikes but also reaffirmed its commitment to bring down inflation.

• “Acknowledging the uncertainty, members did not rule out returning to larger increases if the situation warranted.”

• “Conversely, the Board is prepared to keep rates unchanged for a period while it assesses the state of the economy and the inflation outlook. Interest rates are not a pre-set path.”

China released a set of disappointing economic data including (year-on-year for the month of October, actual versus expectations):

• Industrial production 5.0% versus 5.2%

• Retail sales -0.5% versus 1.0%

• Fixed asset investment 5.8% versus 5.9%   

Commodities 

"Commodity markets took a breather after Friday’s rally. Wavering comments from the Fed officials largely guided the market, though investors remained largely convinced that the Fed is committed to bring inflation to its target range. Surging cases in China was another drag for the energy sector." - ANZ senior commodity strategist, Daniel Hynes.

• Newcastle coal futures +3.2% to US$309/t

• Iron ore futures +1.5% to US$92.95/t

• Copper +0.55% to US$3.85/lb

Latest news

Post market brief

A rather uneventful day at the index level. We held up much better than Wall Street and it was rather surprising to see local tech stocks headline gains.

The moves in lithium stocks likely attracted a lot of eyes, with large cap names like Pilbara Minerals, Allkem and Core Lithium, down -8.7%, -12.4% and -15.8%. All three names sold off on volumes that were at least double their 20-day averages. I covered why lithium stocks got smashed here.

Catalyst aside, the selloff was on panic level volumes. The stocks opened lower, and just kept on selling as the day went on. Allkem and Core Lithium closed around session lows. Pilbara Minerals managed to somewhat bounce.

Pilbara Minerals price chart (Source: TradingView)

Lithium stocks experienced a similar selloff on 1 June due to a Goldman Sachs report. In summary, Pilbara Minerals fell -22% on the day, staged a small bounce and fell another -10% a few weeks later. It took the stock roughly 2 months to recover the losses.

The question now, is does this mark a near-term top for lithium? Let's see if they can hold their recent trading ranges or if a breakdown occurs.

Index charts

S&P/ASX 200: Nothing much to see here. The ASX 200 is holding up relatively well. Its rather extended from all moving averages (200, 50 and 20-day). But holding up whilst in overextended territory in this type of market - we take those.

XJO chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• Life360 (360) +9.8% posted its largest quarterly growth in global monthly active users to 5m, up 39% You. The company expects to hit cash flow positive in 3Q23, a quarter ahead of schedule 

• Incitec Pivot (IPL) +5.9% posted 186% net profit growth in FY22 to $1,027m thanks to higher fertiliser prices. Announced a $400m on-market buyback

• United Malt Group (UMG) +4.5% posted 13.9% revenue growth in FY22 to $1.41bn, reflecting higher barley prices. Profits fell -20% to $11.6m. The company guided to $140-160m EBITDA in FY23 (FY22: $91.8m) 

• Lifestyle Communities (LIC) +2.0% AGM reaffirmed its FY23 guidance, noting a ‘large increase in activity levels’ is expected for the year, which will translate to higher settlement numbers for FY24-25

• Infratil (IFT) +1.6% posted 11% EBITDAF growth to $275.6m for the six months ended 30 September, reflecting strong performances across data centres, Vodafone and Wellington Airport assets 

• Commonwealth Bank (CBA) +1.3% posted 2% cash profit growth in the September quarter to $2.5bn. Key credit quality indicators improved in the quarter, credit provisions were mostly unchanged year-on-year 

• AVZ Minerals (AVZ) +0% will extend its voluntary suspension again, to 15 December 2022 

• Allkem (AKE) -12.4% AGM guided to lithium carbonate prices of US$50,000 a tonne at Olaroz and expects spodumene prices to be in-line with previous quarter, at US$5,000 a tonne due to carried over volumes 

Mid-to-small caps

• DGL Group (DGL) +16.7% said it expects FY23 EBITDA to be between $70-72m compared to $65.6m in FY22. This is an improvement from the company’s comments in August that “earnings growth to flatten in FY23”   

• Resimac (RMC) +2.0% noted ‘fierce competition for home loan originations in 1H23’. Home loan assets under managed sat at $15bn in October from $15.3bn in June 

• Global Lithium (GL1) -4.2% notes that diamond drilling at the Manna Lithium Project is now complete and results will be incorporated into an updated Mineral Resource next month

• Leo Lithium (LLL) -5.7% signed an agreement for port services of Goulamina Lithium Project spodumene at the Abidjan Port,a major West African deep water port

Broker updates 

Scans