Evening Wrap: ASX 200 closes out bumper week, never better, as unrelenting lithium rally continues

The S&P/ASX 200 closed 64.8 points higher, up 0.88%.

As good as it gets. On a total return basis, Aussie stocks have never closed at a better level. We are indeed the lucky country. We've got the good stuff the world wants, and will increasingly want if we are to achieve proposed 2050 carbon emissions reduction targets.

Copper and lithium are going to play a key role in the "transition away from fossil fuels" - which is now officially a thing as per COP28 final comments. Brokers were upgrading their forecasts for these and other metals today, helping resources companies to strong gains.

Let's dive in.

Markets

ASX 200 Session Chart

Here comes Santa Claus...

The S&P/ASX200 (XJO) finished 64.8 points higher at 7,442.7, 0.88% from its session low and 0.26% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 171 to 101.

For the week, the XJO finished up a very tidy 248 points or 3.4% higher. This was the benchmark index's best week in 5 months, and it now sits just 190 points or 2.5% below its all-time high set on 13 August 2021 of 7,633.

But! And this is something you won't read in any other Evening Wrap (I challenge you!), if you add back dividends, on a total return basis the Australian stock market closed at a record high today. It has never been this good for Aussie investors.

On a total return basis the Australian stock market closed at a record high today

Resources stocks dominated proceedings today. Basically, if your stock is involved in digging something out of the ground there's a very good chance it was up. The S&P/ASX 200 Materials Sector (XMJ) +1.9% and S&P/ASX 200 Energy Sector (XEJ) +1.9% were the best performing sectors in response to rising base metals and energy prices.

There's been plenty of attention on copper since the closing statement at the COP28 climate change conference specifically mentioned "transitioning away from fossil fuels". I discussed in an article yesterday how this may have impacted lithium prices, but the price of has copper also got a big boost from the announcement.

Major broker Citi released a research report today which noted commitments made at COP28 would be "massively bullish for metals demand (particularly copper)". According to Citi, increased demand for copper could create a "pathway to our bull case $15k/t average copper price scenario for 2025".

The price of copper got a big boost from COP28

To put this call into perspective, check out the chart above of London Metals Exchange copper. It popped just over 3% Thursday to around US$8,461/t. That's a long way from Citi's bullish US$15,000/t call!

From a technical perspective, it's still a very neutral looking chart for me. But I do note the short term trend ribbon is swinging back to up, and the price is once again above the long term trend ribbon - both major positives. I can't see any reason why the copper price can't keep moving higher in the near term, and a close above US$8,721/t would be particularly bullish.

Healthy gains today among mining and energy stocks

Doing it tough today was the Real Estate Investment Trusts (XPJ) -0.6% which had such a good week prior to today (up 5.1%) one could put this move down to a touch of profit taking heading into the weekend. Property stocks are back to their best levels since February.

Real estate stocks were generally down today, but many had fantastic weeks

I know you've been reading my articles on whether we've seen a low in lithium prices, and would be all over the reasons behind the stunning recovery in ASX lithium stocks. They were again on top of the pile today, with honourable mentions for Core Lithium (ASX: CXO) +15%, Piedmont Lithium (ASX: PLL) +12.3%, and IGO (ASX: IGO) +6.1%.

Short covering, bottom fishing, long term positional buying, does it really matter? Lithium stocks are back!

Economy

Data dump confirms Chinese economy struggling

It’s called the China “data dump”, i.e. the monthly release of Industrial Production, Retail Sales, Fixed Asset Investment, and Unemployment Rate. Some good news, and some bad news. Industrial production was a hit, up 6.6% p.a. to November versus October’s 4.6% p.a., and ahead of the 5.7% p.a. forecast by economists. Some of this could be explained by base effects, though, as it was this time last year Chinese factories were largely closed due to the harsh COVID-19 restrictions.

The rest of the data was roughly in line with the prevailing consensus that the Chinese economy is really struggling right now. Retail sales were up 10.1%, but weaker than the 12.6% p.a. gain forecast by economists, and Fixed Asset Investment was flat at 2.9% p.a. vs 3% p.a. expected. The unemployment rate was steady at 5% p.a.

What to watch out for...

In the USA, at 12:30am AEDT the Empire State Manufacturing Index is forecast to drop to 2.0 in November from October’s 9.0, then at 1:45am AEDT we’ll get the “flash” or the earliest estimates of Manufacturing and Services PMI’s. The Manufacturing PMI is expected to be 49.5 for this month compared to last month’s 49.4, and the Services PMI is expected to be 50.7 versus 50.8.

Latest News

Interesting Movers

Trading higher

• +17.8% Zip Co. (ZIP) - No news, recent broker price target upgrades, building techincal rally

• +15.1% Core Lithium (CXO) - Broad-based ASX lithium sector strength, stabilising lithium carbonate price

• +14.8% Weebit Nano (WBT) - No news, WBT doesn't need a reason to be on this list! Decent technical bounce.

• +12.3% Piedmont Lithium Inc (PLL) - Broad-based ASX lithium sector strength, stabilising lithium carbonate price

• +9.3% Chalice Mining (CHN) - Rare earths got some of the lithium sector love

• +9.2% HMC Capital (HMC) - Broad-based property sector rally on falling long term bond yields

• +8.6% Adbri (ABC) - Kwinana Upgrade Project and Trading Update

• +6.1% IGO (IGO) - Broad-based ASX lithium sector strength, stabilising lithium carbonate price

• +5.7% Reliance Worldwide Corporation (RWC) - No news, stocks exposed to US economy stronger this week on falling long term US rates

• +5.5% Maas Group Holdings (MGH) - Proposed extension of share buyback

• +5.5% Liontown Resources (LTR) - Broad-based ASX lithium sector strength, stabilising lithium carbonate price

Trading lower

• -10.4% APM Human Services International (APM) - No news, check out the trend on the chart, par for the course

• -10.2% Telix Pharmaceuticals (TLX) - No news

• -9.7% Cromwell Property Group (CMW) - No news

• -7.0% Red 5 (RED) - Becoming a substantial holder

• -6.7% Sigma Healthcare (SIG) - Continued pullback after Chemist Warehouse pop

• -5.5% Cettire (CTT) - No news, short term techincal trend under pressure

• -5.1% Megaport (MP1) - No news, short term techincal trend under pressure

Broker Notes

• AGL Energy (AGL) retained at outperform Macquarie; Price Target: $10.89 from $11.51

• Auckland International Airport (AIA) retained at outperform Macquarie; Price Target: $9.56

• Allkem (AKE) upgraded to overweight from neutral at Jarden; Price Target: $11.40 from $12.00

• Alumina (AWC)

  • Upgraded to overweight from neutral at Barrenjoey; Price Target: $1.10

  • Retained at neutral Macquarie; Price Target: $0.80

• Boss Energy (BOE) upgraded to buy from hold at Jefferies; Price Target: $5.20 from $5.10

• Cobram Estate Olives (CBO) retained at buy Ord Minnett; Price Target: $1.82 from $1.61

• CQG Partners (GQG) retained at buy Ord Minnett; Price Target: $2.20 from $2.15

• Mach7 Technologies (M7T) initiated at overweight JP Morgan; Price Target: $1.05

• Medibank Private (MPL) retained at neutral Macquarie; Price Target: $3.75

• NIB Holdings (NHF) retained at neutral Macquarie; Price Target: $7.70

• Orora (ORA)

  • Upgraded to positive from neutral at E&P; Price Target: $3.00

  • Retained at outperform Macquarie; Price Target: $3.30

  • Retained at overweight Morgan Stanley; Price Target: $3.50

• Origin Energy (ORG) retained at outperform Macquarie; Price Target: $9.26 from $9.39

• Pro Medicus (PME) initiated at overweight JP Morgan; Price Target: $100.00

• Seek (SEK) retained at lighten Ord Minnett; Price Target: $19.00

• Sigma Healthcare (SIG) downgraded to hold from buy at Shaw and Partners; Price Target: $0.90

• Viva Energy Group (VEA) retained at equalweight Morgan Stanley; Price Target: $3.21

• Volpara Health Technologies (VHT) downgraded to hold from buy at Bell Potter; Price Target: $1.15 from $0.85

• Zip Co. (ZIP) retained at neutral Citi; Price Target: $0.51

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