Evening Wrap: ASX 200 falls for a fourth straight session + Can the market bounce from here?

The Index is down 3.8% in the last four sessions to a near three month low, the Tech Index bounces from session lows of 1.1% to close 0.88% higher, why investors should be bullish about the last week of June and the rest of July (based on historical data) and Macquarie's take on the lithium and Australian consumer sector.

Let's dive in.

ASX 200 Session Chart

ASX 200 falls for a fourth straight session (Source: Market Index)

Markets

The ASX 200 fell for a fourth consecutive session, finishing a little off session lows of -0.62%. The Index is now in this awkward place where it's tumbled into no man's land (away from recent trading ranges and key moving averages) but increasingly oversold and due for a short-term bounce. It was interesting to see Tech stocks outperform on Monday, with most heavyweight names like Wisetech, Xero, NextDC and Altium finish 0.3% to 1.5% higher.

While the ASX 200 might be trading near 3-month lows, the S&P 500 has plenty of breathing room. It's down around 2% from recent highs and still up 4.0% since June. Let's see if the US market can stage a shallow pullback where it can set a higher low. Maybe they can keep things together (unlike us).

Economy

No major economic announcements.

Latest news

Market Insights: Bounce Time?

It's a little bit of a dull market at the moment. We're in the midst of a pullback and the next few days will provide us with more feedback as to whether or not:

a) Buyers step up and names catch a bid

b) No support and March lows is back on the cards

I had a look at how the ASX 200 performs historically (based on data from June 1992 to March 2023) in the last week of June and July, and the data is rather promising. You can read the full article via the "Will the ASX 200 bounce in July" link above.

In summary:

• June is the second worst performing month of the year, with an average fall of 0.68%

• In the last ten years (2022-2012) the ASX 200 has been positive only 50% of the time in June. The average performance has been -1.01% and the median is 0.03%

• The last four days of June have historically been positive, up 0.03%, 0.23%, 0.03% and 0.19%

• July is the third best performing month of the year, with an average gain of 2.2%

• In the last ten years (2022-2012) the ASX 200 has been positive in July 100% of the time. The average gain was 3.28% and the median was 4.25%.

Interesting news and movers

Trading higher

• +17.7% Silk Laser (SLA) – API to acquire at $3.35 per share

• +16.7% Step One Clothing (STP) – Trading update

• +6.7% Westgold Resources (WGX) – Advises to reject MGV takeover

• +6.4% DDH1 (DDH) – Perenti to acquire DDH1

• +4.9% Capricorn Metals (CMM) – Upgraded by Macquarie 

• +4.7% Metcash (MTS) – Earnings

• +2.9% Galan Lithium (GLN) – Granted Phase 1 development permit

• +2.5% McMillan Shakespeare (MMS) – Upgraded by CLSA

• +2.4% Graincorp (GNC) – Russia unrest

Trading lower

• -16.3% Lark Distilling (LRK) – Guidance 

• -12.3% Appen (APX) – CFO resignation

• -5.7% Base Resources (BSE) – Production guidance

• -9.8% Perenti (PRN) – To acquire DDH1

• -5.5% Metals X (MLX)

• -1.7% Megaport (MP1) – Downgraded by Morgan Stanley

• Lithium sector move: Latin Resources (-8.9%), Delta Lithium (-6.8%), Leo Lithium (-5.3%), Essential Minerals (-4.8%), Patriot Lithium (-3.9%), Sayona Mining (-2.8%)

Broker notes

Macquarie on the Australian consumer sector:

• “Series of profit warnings from Australian consumer stocks point to a significant shift in behaviour over past two months.”

• “Tailwind of unwinding of excess savings rate has now normalised; rising cost of living to drag on spending in December half.”

• “Prefer Staples over Discretionary and Food and Bev. Top picks COL and EDV.”

Macquarie on Australian lithium and rare earth miners:

• “The Chinese Government recently announced an extension of the tax breaks for NEVs until 2027, in line with our expectations.”

• “We recently lowered our CY23 lithium and rare earth price forecasts by 9-15% to reflect weaker spot prices in 2QCY23.”

• “MIN and PLS are our preferred producers with PMT presenting the greatest upside on exploration in the near term.”

Macquarie on Cochlear (COH)

• “Our survey of 11 US-based audiologists highlights improvement in new CI patients; however, barriers to increased uptake remain.”

• “COH remains the highest rated product offering, but with improved trends for AB. COH's N8 is generally viewed as not materially different to the N7.” 

• “While COH has a strong market position/product offering, we see valuations as elevated based on expected growth. Retain an Underperform rating.”

Scans