Evening Wrap: ASX 200 eyes record as communications, financials stocks power, lithium rebounds on PLS, IGO upgrades

The S&P/ASX 200 closed 66.5 points higher, up 0.86%.

It was another strong day for the S&P/ASX200 with important contributions from Communications and Financials stocks.

All 11 of the major ASX sectors were higher, but there were laggards, particularly in Energy and Consumer Staples.

Elsewhere, in a not-terrible Resources sector, beaten down lithium stocks finally rebounded on broker upgrades for PLS and IGO. For all of these moves and a whole lot more...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 66.5 points higher at 7,829.7, 0.86% from its session low and just 0.03% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 165 to 106.

The Communication Services (XTJ) (+1.4%) was the best performing sector today as sector heavyweights Telstra Group (ASX: TLS), REA Group (ASX: REA), TPG Telecom (ASX: TPG), Car Group (ASX: CAR) each hit their straps.

Communication Services sector winners

Also doing well today was the Financials (XFJ) (+1.3%) sector which was helped by potential takeover chat surrounding Insignia Financial (ASX: IFL) (+13.6%). Zip Co. (ASX: ZIP) (+4.3%) continued its stellar run, and the big banks weren’t too shabby either.

I note several of the best performers in the list below are also regulars in my ChartWatch ASX Scans uptrends list.

Best performers in the Financials sector

A welcome return to form for the XFJ

It was a welcome return to form for the XFJ, which given its sheer size, and therefore contribution to index points – will be absolutely crucial in driving the S&P/ASX 200 to a new record high (I’ve got the latest on the XJO in ChartWatch).

There was a big gap between the best two and the next two best performing sectors in Consumer Discretionary (XDJ) (+0.8%) and Information Technology (XIJ) (+0.8%). Both are also what I would classify as “outperforming” sectors over the last 12 months. The big fund managers played their favourites today.

As for underperforming sectors, despite the fact that all 11 of the major ASX sectors logged gains, there were a few serial disappointers at the bottom of the sector performance heap. Energy (XEJ) (+0.1%) and Consumer Staples (XSJ) (+0.3%) were notable laggards.

The Resources (XJR) (+0.5%) sector wasn’t completely terrible, but one could argue it also failed to garner sufficient positive attention from the big fund managers today.

If I squint, lithium wasn’t terrible as Pilbara Minerals (ASX: PLS) (+1.7%) and IGO (ASX: IGO) (+1.8%) each received a sympathy rating upgrade from JP Morgan. That’s the one you get only because your share price has tanked and you no longer look ridiculously overvalued. NEUTRAL from UNDERWEIGHT on each.

If you squint, lithium wasn’t terrible today

ChartWatch

Brent Crude Oil Futures (back-adjusted, front month) NYMEX

Testing a key point of supply

The last time we covered brent crude was in ChartWatch in the Evening Wrap on 19 June.

In that update, we were tracking a strong short term rally, but were mindful of potential overhead points of supply, particularly 87.45-88.53 (note values have changed due to contact rollover/back-adjustment process).

The chart above shows that x did indeed mark the spot, and supply has manifested itself in the form of two distinct supply-side candles Friday and Monday (the last candle, today, is still live, and therefore should be discounted).

Nothing goes up in a straight line, and the retracement so far is modest within the context of the strong broader short term uptrend.

If the short term uptrend ribbon can provide quick excess demand – which will manifest itself as demand-side candles (i.e., white-bodied and or downward pointing shadows), then there’s every chance the September 2023 / April highs around $89.96-$90.09 can be tested.

On the other hand, a close below demand at 83.57-83.81 (and the coinciding dynamic demand from the short term uptrend ribbon) would end the prevailing short term uptrend and likely see a retracement to the long term uptrend ribbon.

S&P/ASX 200 (XJO)

We need more days like today

The last time we covered the XJO was in ChartWatch in the Evening Wrap on 5 July.

Once again, just a quick update here – because we remain firmly stuck in the trading range. But I must shout out today’s full white candle – that in theory signifies strong excess demand – and in theory bolsters the case for an imminent breakout to new highs.

That’s the theory. In practice, each time I’ve pointed out such a full white candle lately it’s been followed by severaly very annoying black ones.

Anyways, you know what to look for in terms of good vs bad / demand vs supply. So, keep watching this space!

Economy

Today

• Westpac Consumer Sentiment July

  • -1.1% to 82.7 vs +1.7% in June

  • Readings below 100 indicate pessimism vs above 100 indicate optimism, so consumers become more pessimistic

  • Only muted response to Stage 3 tax cuts so far

  • Family finances category showing increased pressure

  • Big jump in rate rise expectations - 60% of respondents now anticipate higher rates

  • Jobs market / outlook is still stable = positive

  • Weaker sentiment towards housing and housing prices

Westpac–Melbourne Institute Consumer Sentiment Index. Source: Westpac–Melbourne Institute

• NAB Business Confidence June

  • Business confidence rose 6pts to +4 index points vs -3 in May

  • Business conditions fell 2pts to +4 index points

  • Forward orders were flat at -7 index points (unrounded) and are now weakest in retail, manufacturing, mining and wholesale in trend terms

  • Importantly, labour cost growth fell to 1.8% and product price growth eased to 0.7% in quarterly terms = easing inflationary pressures on business

Chart 1: Confidence & Conditions (Net Balance, SA). All data seasonally adjusted and subject to revision. Survey conducted from 24 to 28 June 2024, covering around 400 firms across the non-farm business sector. Source: NAB Economics.

Later this week

Wednesday

• 00:00 USA Federal Reserve Chairman Jerome Powell delivers Semi-Annual Monetary Policy Report to Senate Banking Committee

• 11:30 CHN Consumer Price Index (CPI) and Producer Price Index (PPI) June inflation data

  • CPI: +0.4% p.a. forecast vs +0.3% p.a. in May

  • PPI: -0.8% p.a. forecast vs -1.4% p.a. in May

Thursday

• 00:00 USA Federal Reserve Chairman Jerome Powell testimony Day 2

• 10:30 USA Core CPI June (forecast +0.2% m/m and +3.5% p.a. vs +0.2% m/m and +3.5% in May)

Friday

• 10:30 USA Core PPI June (forecast +0.1% m/m and +2.0% p.a. vs +0.0% m/m and +1.8% in May)

Saturday

• 00:00 USA Preliminary University of Michigan Consumer Sentiment July (67.0 forecast vs 68.2 in June)

Latest News

Interesting Movers

Trading higher

• +13.6% Insignia Financial (IFL) - Response to ASX Price Query

• +8.0% Genusplus Group (GNP) - Genus Awarded Long Term Western Power Maintenance Works, rise is consistent with prevailing short and long term uptrends 🔎📈

• +7.0% Droneshield (DRO) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.6% Judo Capital (JDO) - No news, but has been discussed as a takeover target recently also, generally stronger ASX financials sector today, bouncing off long term uptrend ribbon 🔎📈

• +6.3% Botanix Pharmaceuticals (BOT) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.3% Latin Resources (LRS) - No news, modest bounce in ASX lithium stocks today, lithium futures up slightly in China

• +5.7% Electro Optic Systems (EOS) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +5.0% Liontown Resources (LTR) - No news, modest bounce in ASX lithium stocks today, lithium futures up slightly in China

• +4.3% Zip Co. (ZIP) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.0% Superloop (SLC) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

Trading lower

• -16.1% Meteoric Resources (MEI) - Continued negative response to yesterday's Caldeira's Scoping Study Confirms Exceptional Financials, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down 🔎📉

• -8.8% Calix (CXL) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• -7.2% WA1 Resources (WA1) - No news 🤔

• -7.0% Core Lithium (CXO) - Pullback after positive response to yesterday's Production and Financial Position Update, fall is consistent with prevailing short and long term downtrends 🔎📉

• -6.0% Clinuvel Pharmaceuticals (CUV) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

• -4.0% Australian Clinical Labs (ACL) - No news, fall is consistent with prevailing short and long term downtrends 🔎📉

Broker Notes

Arafura Rare Earths (ARU)

• Retained at underweight at JP Morgan; Price Target: $0.10 from $0.14

Bellevue Gold (BGL)

• Retained at buy at Goldman Sachs; Price Target: $2.20

BHP Group (BHP)

• Retained at overweight at JP Morgan; Price Target: $52.00

Bluescope Steel (BSL)

• Retained at overweight at JP Morgan; Price Target: $23.00

• Retained at outperform at Macquarie; Price Target: $26.10 from $29.45

Capitol Health (CAJ)

• Retained at outperform at Macquarie; Price Target: $0.32

Chalice Mining (CHN)

• Retained at overweight at JP Morgan; Price Target: $2.30 from $2.40

Capricorn Metals (CMM)

• Retained at neutral at Goldman Sachs; Price Target: $5.25 from $5.10

Clinuvel Pharmaceuticals (CUV)

• Downgraded to hold from add at Morgans; Price Target: $16.00

Core Lithium (CXO)

• Upgraded to neutral from sell at Jarden; Price Target: $0.10 from $0.12

• Retained at underweight at JP Morgan; Price Target: $0.08 from $0.09

• Retained at neutral at Macquarie; Price Target: $0.09

De Grey Mining (DEG)

• Retained at buy at Goldman Sachs; Price Target: $1.35 from $1.43

• Retained at overweight at JP Morgan; Price Target: $1.55 from $1.65

Evolution Mining (EVN)

• Retained at buy at Goldman Sachs; Price Target: $4.15 from $4.00

• Retained at overweight at JP Morgan; Price Target: $4.05 from $4.20

Fortescue (FMG)

• Upgraded to hold from underperform at Jefferies; Price Target: $21.00

• Retained at neutral at JP Morgan; Price Target: $25.00 from $27.00

Generation Development Group (GDG)

• Downgraded to hold from add at Morgans; Price Target: $2.57 from $2.56

Gold Road Resources (GOR)

• Retained at buy at Goldman Sachs; Price Target: $2.10 from $1.95

• Downgraded to neutral from overweight at JP Morgan; Price Target: $1.90 from $2.00

GQG Partners (GQG)

• Retained at buy at Goldman Sachs; Price Target: $3.00 from $2.73

• Retained at outperform at Macquarie; Price Target: $3.05 from $2.80

• Downgraded to accumulate from buy at Ord Minnett; Price Target: $3.20 from $2.85

Guzman y Gomez (GYG)

• Initiated at overweight at Wilsons; Price Target: $31.98

Healius (HLS)

• Retained at neutral at Macquarie; Price Target: $1.45

Integral Diagnostics (IDX)

• Retained at outperform at Macquarie; Price Target: $2.85 from $2.65

IGO (IGO)

• Upgraded to neutral from underweight at JP Morgan; Price Target: $6.40 from $6.30

Iluka Resources (ILU)

• Upgraded to overweight from neutral at JP Morgan; Price Target: $8.20

Jumbo Interactive (JIN)

• Downgraded to underweight from neutral at Jarden; Price Target: $15.40 from $15.90

Liontown Resources (LTR)

• Retained at underweight at JP Morgan; Price Target: $0.70

Lynas Rare Earths (LYC)

• Retained at underweight at JP Morgan; Price Target: $4.70 from $5.00

Meteoric Resources (MEI)

• Retained at outperform at Macquarie; Price Target: $0.36 from $0.46

Macquarie Group (MQG)

• Downgraded to hold from outperform at Macquarie; Price Target: $201.00 from $196.00

Newmont Corporation (NEM)

• Downgraded to neutral from overweight at JP Morgan; Price Target: $66.00 from $67.00

Northern Star Resources (NST)

• Retained at neutral at Goldman Sachs; Price Target: $14.40 from $14.50

• Retained at overweight at JP Morgan; Price Target: $15.00 from $15.50

Pilbara Minerals (PLS)

• Upgraded to neutral from underweight at JP Morgan; Price Target: $2.95 from $3.10

Red 5 (RED)

• Retained at outperform at Macquarie; Price Target: $0.55

Rio Tinto (RIO)

• Retained at overweight at JP Morgan; Price Target: $145.00

Ramelius Resources (RMS)

• Retained at outperform at Macquarie; Price Target: $2.10

Regis Resources (RRL)

• Downgraded to neutral from buy at Citi; Price Target: $1.90 from $1.70

• Retained at neutral at Goldman Sachs; Price Target: $2.10 from $2.30

• Retained at outperform at Macquarie; Price Target: $2.90

South32 (S32)

• Retained at overweight at JP Morgan; Price Target: $4.40 from $4.10

Sandfire Resources (SFR)

• Retained at overweight at JP Morgan; Price Target: $11.40 from $10.80

Sims (SGM)

• Upgraded to neutral from underweight at JP Morgan; Price Target: $10.00

Sonic Healthcare (SHL)

• Retained at neutral at Macquarie; Price Target: $26.10 from $26.35

Transurban Group (TCL)

• Retained at neutral at Macquarie; Price Target: $12.81 from $13.74

The Lottery Corporation (TLC)

• Retained at outperform at Macquarie; Price Target: $5.50

Scans