Evening Wrap: ASX 200 falls, China GDP beats expectations, UBS upgrades Pilbara Minerals

China's GDP grew 4.5% in the first quarter - the fastest pace in a year, the RBA flags population growth as a potential inflationary risk, UBS upgrades Pilbara Minerals to a Buy from Neutral and US earnings season gears up.

Let's dive in.

ASX 200 Session Chart

ASX 200 pulls back amid a choppy session (Source: Market Index)

Markets

Another relatively uneventful day. A slew of mostly positive economic data came out of China at 12:00 pm AEST, which helped the ASX 200 push to session highs of around -0.16%. In the absence of any major economic developments, we turn our attention to US earnings season. Tonight we will see first quarter results from Goldman Sachs, Johnson & Johnson, Bank of America, Netflix and United Airlines.

Economy

RBA minutes for the April meeting came out. Some highlights include:

• "Members assessed the value of pausing at this meeting to gather more information on the economic outlook."

• "Members observed that it was important to be clear that monetary policy may need to be tightened at subsequent meetings."

• "They thought that the Board's future cash rate decisions would depend on the developments of the global economy, trends in household spending and the outlook for inflation and the labour markets."

• On population growth, "members noted that this could put significant pressure on Australia's existing capital stock, especially housing, which would in turn manifest in higher consumer prices."

China’s GDP grew 4.5% year-on-year in the first quarter, the fastest pace in a year and higher than the 4.0% expected. A slew of March economic data was released including:

• Industrial production up 3.9% year-on-year vs. 4.0% expected

• Fixed asset investment up 5.1% vs. 5.7% expected

• Retail sales jump 10.6% vs. 7.4% expected  

Some other stats of interest include:

• China’s aviation industry completed 129 million passenger trips in the March quarter, up 68.9% year-on-year 

• “China’s economy is not seeing deflation at the moment and won’t see deflation in the next sage,” – Spokesperson of the National Bureau of Statistics

• “China's economic growth in Q2 is expected to pick up significantly from Q1 due to low base last year, before slowing in the second half as base increases, said spokesperson of National Bureau of Statistics,” – NBS

Latest news

Market Insights

Market Insights is taking a break today.

Interesting news and movers

Trading higher

• +13.1% Telix Pharma (TLX) – Earnings

• +11.1 Solvar (SVR) – Trading update

• +11.1% EcoGraf (EGR) – Signs Tanzanian gov’t agreement

• +7.7% Leo Lithium (LLL)

• +6.5% Core Lithium (CXO) – Upgrades Finniss mineral resource

• +4.2% Pilbara Minerals (PLS) – Upgraded by UBS

Trading lower

• -9.3% Sayona Mining (SYA)

• -9.2% Lake Resources (LKE)

• -4.8% 29 Metals (29M)

• Gold sector move: Ramelius (-3.1%), Bellevue Gold (-2.5%), Perseus (-1.2%)

Broker updates

UBS on lithium:

• "Our price forecasts have been trimmed c.10-30% over 23/24, reducing earnings forecasts by 10-40% while the ~20% upgrade to our long-term spodumene, carbonate and hydroxide prices largely offsets the near-term lower earnings leaving NPV-based price targets largely unchanged."

• "We upgrade PLS from Neutral to BUY with a $4.60 PT (from $4.65) and it remains a preferred high beta play to any near-term bounce."

• "IGO (BUY, $19.10 PT from $18.20) remains a preferred quality, long-term option, something only reinforced by its latest nickel downstream venture with Wyloo."

• "We remain BUY rated on AKE $16.30 PT ($16.60) and MIN $94.00 PT ($112.00), and Neutral on LTR $2.80 PT ($2.70)."

A few standalone Macquarie notes:

Atlas Arteria (ALX): Neutral with $6.55 target price

• "APRR competitors traffic filing suggests a 3-4% growth, above our 1.3% CY23 expectation."

• "US roads would be softer given price rises, and in Skyway’s case, road works, albeit Greenway is poised for COVID rebound."

• "Neutral. Upside opportunities in France are harder to see given recent government commentary on concessions."

Carnaby Resources (CNB): Outperform with $1.70 target price

• "CNB has announced pXRF copper results from Mount Hope, including the discovery of a second mineralised lode at depth at Mount Hope Central."

• "CNB is undertaking a 40,000m drill program at the Greater Duchess project in CY23, with three rigs focussed on exploration and resource delineation."

• "Maiden resource scheduled before the end of June presents a key near term catalyst for CNB."

IPH (IPH): Outperform with $12.85 target price

• "Set of data downloaded by unauthorised 3rd party limited and contained to only a small no. of clients within Spruson & Ferguson (AU)."

• "Underlying P&L impacted in the form of a revenue shortfall of $4.4m in March. The majority of this should be recovered over the balance of 2H23."

• "Greater resourcing towards cyber should also enhance IPH’s appeal as a partner in the market."

Scans