Evening Wrap: ASX 200 extends gains, V-shaped bounce for iron ore miners

The S&P/ASX 200 closed 70 points higher, up 1.02%.

The local sharemarket rallies for a third straight session, iron ore stocks bounce back, lithium stocks begin to stall and US inflation due on Tuesday.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 10 out of 11 sectors higher

• Materials led to the upside thanks to a recovery in commodity prices

• Growth heavy sectors including Tech and Discretionary also outperformed

• Healthcare was the only red sector

• 73% of the top 200 companies advanced

Stocks

• Nickel Industries (ASX: NIC) +6.7% posted a 56% Resource increase for the Hengjaya Mine from 2.4m to 3.7m tonnes of contained nickel metal

  • Hengjaya is now amongst the top 10 global nickel resources  

• A2 Milk (ASX: A2M) +2.5% said its State Administration for Market Regulation (SAMR) licence was renewed, effectively to late February 2023 

• Tietto Minerals (ASX: TIE) -1.9% successfully raised $49.3m at 58 cents per share to Chijin International. The raise was held at an 11.8% premium to the stock’s last close

• Atlas Arteria (ASX: ALX) -2.1% confirmed recent media speculation regarding its participation in the competitive sale of its Chicago Skyway 

• Liontown Resources (ASX: LTR) -3.1% has executed a Letter of Award with Zenith Energy for the supply of power to Kathleen Valley on a Build, own and Operate basis

  • This is expected to be the largest off-grid wind-solar-battery storage hybrid power station for a mining project in Australia

• MA Financial Group (ASX: MAF) -21.8% shares tumbled following media coverage regarding the Federal Government’s review into the immigration system and all visa programmes including the Significant Investor Visa (SIV) 

Economy

• UK GDP rose 0.2% month-on-month in July from -0.6% in June

  • Consensus expected a rise of 0.4%

  • Services was the main driver of economic growth

• UK industrial production rose 1.1% year-on-year in July from 2.4% in June

  • Consensus expected a rise of 1.8%

  • Production fell -0.3% month-on-month

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange remain unchanged due to the mid-Autumn festival holiday

  • Prices rallied 3.7% last Friday

Scans

Latest news

Post market charts

S&P/ASX 200: The powerful V-shaped rally continues. If you’re frustrated because you missed out on the move. Don’t be. It’s a volatile market where things aren’t really setting up - they’re just ripping or dipping. 

The market has bounced where it needed to and averted the conversion about revisiting June lows. The question is, is this just another rally that traders can fade? Or can the gains actually show some form of consolidation, especially as we push towards the 200-day moving average.

XJO chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Materials: Doing a lot of the heavy lifting for the index. Earlier today, I wrote about three things that iron ore investors should look out for. In short:

1. China’s steel output tends to pick up over the next two months amid peak construction and property sales season

2. The 20th National Congress of the CCP is due to meet on Sunday, 16 October. Could see some more support, stimulus and economic guidance-related headlines

3. China’s property is still showing no signs of recovery

In summary, things are bouncing from dire levels but still bleak. More help is needed.

XMJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Tech: Another sector that continues to push. Although, tech heavyweights like WiseTech (ASX: WTC) and Xero (ASX: XRO) are starting to stall after recent moves. Not the best look (in terms of individual stocks).

XIJ chart (Source: TradingView, Annotations by Market Index)

Sectors and stocks

V-shaped bounce for iron ore names: Iron ore majors have made a V-shaped comeback after a brief dip due to sub-US$100 iron ore prices and trading ex-dividend. Fortescue (ASX: FMG) has previously been well supported during these nose-dive dips. It's now at the mid-point of its recent trading range.

Fortescue chart (Source: TradingView, Annotations by Market Index)

Lithium starting to fatigue: More broadly speaking, we’re starting to see lithium names start to stall after the recent move. Notable stocks like Allkem (ASX: AKE), Liontown Resources (ASX: LTR) and Lake Resources (ASX: LKE) closed the session down 2-3%. Core Lithium (ASX: CXO) is struggling to push through previous highs.

Core Lithium chart (Source: TradingView, Annotations by Market Index)

Still, there are a few names that continue to defy gravity and push higher, including Global Lithium (ASX: GL1), Pilbara Minerals (ASX: PLS) and Sayona Mining (ASX: SYA).

Uranium pullback: Monday’s Morning Wrap talked about some exhaustion we’re seeing with the Global X Uranium ETF that closed 0.4% higher last Friday. This was during a session where the Nasdaq rallied 2%, so it underperformed most other sectors and risk-oriented ETFs. This translated into some broad-based weakness for the sector, with most names in red.

Altium: Mentioned it a few times in past Evening Wraps. Another name that's stalling after pushing out.

Altium chart (Source: TradingView, Annotations by Market Index)

Temple & Webster: Rallying into the 200-day. Some pretty interesting volume bars

Temple & Webster chart (Source: TradingView, Annotations by Market Index)

Food for thought

Who talks about recession the most: S&P 500 Financials (85%) and Real Estate (73%) sectors have the highest percentage of companies citing "recession" on Q2 earnings calls, according to FactSet.

Source: FactSet

S&P 500 historical performance post Midterm elections: Stocks seem to get a kick once the election is over, with a solid 14.1% average gain the year after Midterms since World War II, according to Carson Group.

Source: Carson Group

US CPI print on Tuesday: US inflation data will be released on Tuesday at 10:30 pm AEST. It will be interesting to see how US markets trade tonight, perhaps a skittish kind of session? Consensus expects headline inflation to fall to 8.1% in August from 8.5% in July. Core inflation is expected to remain unchanged month-on-month at 5.9%.

Source: Wall St Journal