Evening Wrap: ASX 200 extends gains, iron ore prices retreat, RBA prepares 10th straight hike

The S&P/ASX 200 closed 45 points higher, up 0.62%. 

The ASX 200 is up 1.06% in the last three sessions, the RBA is set to hike rates by another 25 bps to 3.6% tomorrow at 2:30 pm AEDT and a broad-based review of interesting charts and set ups.

Let's dive in.

ASX 200 Session Chart

The bounce back continues. The ASX 200 gaps up, stages another rally around 1:30 pm AEDT and closes a little off session highs (Source: TradingView)

Markets

Nature is healing but is this a buyable rally or a bull trap?

• Discretionary led to the upside with notable moves from Harvey Norman (+2.7%), Wesfarmers (+2.4%) and JB Hi-Fi (+2.0%)

• Real Estate snapped a three-day losing streak, with most larger cap names up 1-2%

• Technology was handballed a strong session after the Nasdaq rallied 2% last Friday

• Resource sectors underperformed after Chinese iron ore futures on the Dalian Commodity Exchange fell 2.8% and oil prices eased 1.1%

Economy

No major economic news on Monday. We have the RBA interest rate decision tomorrow at 2:30 pm AEDT. Consensus expects another 25 bps to 3.6% – the 10th consecutive hike since May 2022. In terms of ASX 200 performance on rate hike days

• 6 hikes have been in-line with expectation (+0.06%)

• 2 hikes have been larger-than-expected (-0.975%)

• 1 hike has been smaller-than-expected (+3.48%)

Latest news

Market Insights

I scanned for stocks over the weekend so today's insights will be some short and sharp techno-fundamental talk.

Tech: The broad market has been choppy but the ASX 200 Info Tech Index is trying to move higher, trading around the key 200-day moving average.

ASX 200 Info Tech Index (Source: TradingView)

Travel: A few travel names trying to poke their head above recent ranges like Qantas and Webjet below.

Qantas chart (Source: TradingView)

Webjet chart (Source: TradingView)

Iron ore: Iron ore futures in China fell 2.5% as the market opened after the NDRC vowed to crack down on speculation and other illegal activities to curb surging prices. This seems to always happen when iron ore prices go on a good run. A chart like BHP has experienced a V-shaped bounce, now it needs to consolidate.

BHP chart (Source: TradingView)

Gold: Still waiting for US dollar and yields to peak. There is a mid-cap name that's trying to push a longstanding trendline.

Ramelius chart (Source: TradingView)

Healthcare: Fisher & Paykel breaking out of an eight week base.

Fisher & Paykel chart (Source: TradingView)

Interesting news and movers

Trading higher

• +7.0% Ioneer (INR)

• +6.6% Pact Group (PGH) – Media speculation re crate and pooling business

• +6.3% Core Lithium (CXO) – Upgrades MRE at Finniss

• +4.7% Hub24 (HUB)

• +4.2% Domain (DHG)

• +3.8% Pinnacle Investment (PNI)

• +3.8% Kogan.com (KGN) – Continuation rally after +11% in last three 

• +3.7% Novonix (NVX)

• +3.3% Breville Group (BRG) – Consolidation bounce after -5.5% in last three

• Tech sector move: Brainchip- (+16.7%), Life360 (+10.7%), Block (+5.5%), Weebit Nano (+4.4%), Xero (+3.8%)

Trading lower

• -6.5% Pushpay (PPH) – Pegasus Bidco scheme of arrangement

• -4.5% Lynas Rare Earths (LYC)

• Iron ore sector move: Fortescue (-2.5%), Rio Tinto (-0.8%)

Broker updates

Citi's notes on Monday:

Nufarm (NUF): Buy with $6.90 target price

• "We retain our view that the US Ag market should remain positive for 2023."

• "Although global crop prices and farmer profitability are expected to moderate YoY, they still remain elevated and above historical averages."

Pro Medicus (PME): Upgrade to Neutral with $61.00 target price

• Upgraded PME from a Sell rating after the stock tanked approximately 8% post earnings

• "We view PME’s business model as attractive, with a real competitive advantage in the PACS space but the valuation of ~70x PE FY25 is keeping us on the sideline."

Sonic Healthcare (SHL): Upgrade to Buy with $36.00 target price

• "The under-geared balance sheet offers optionality for buyback or acquisitions."

• "While several of these markets are currently under some pricing pressure, we believe it is likely that the company could grow organic revenue through the cycle at a low to mid single digit level."

Scans