Evening Wrap: ASX 200 falls for a fourth straight session with all sectors in red

The Index is now down almost 3% in the last four sessions, every sector finished lower led by resources and banks, the Fed's higher-for-longer messaging sends bond yields even higher, UBS take on rare earths and Morgan Stanley shares its views on resource stocks.

Let's dive in.

ASX 200 Session Chart

ASX 200 tumbles to finish near worst levels (Source: Market Index)

Markets

Ouch. What an ugly day. The ASX 200 tumbled and finished at worst levels, now on a 4-day losing streak, down 2.9%. The weakness on Thursday was broad-based, with every sector closing in negative territory, led by resources and the big four banks. Things have gotten pretty ugly and we recap some key charts below.

Economy

No major economic announcements. 

Latest news

Charts of Interest

The past three sessions have flagged a lot of broad-based weakness. But instead of bouncing off the key trendline, we puked. This is where the Index becomes increasingly oversold and due for a bounce. But when will we get such reprieve? Does 7,000 come back into play?

ASX 200 daily chart (Source: TradingView)

The rise in bond yields has been a major pain point for markets. US bond yields have been ticking higher and climbing to levels not seen since 2006-07. The Fed's hawkish pause only reinforced the recent price action, with its median 2024 dot plot shifting to 5.125%, up from 4.62%.

Back at home, the Aussie 10-year is pushing recent highs and close to levels not seen since January 2014.

Aussie 10-year yield (Source: TradingView)

Interesting news and movers

Trading higher

• +16.7% New Zealand King Salmon (NZK) – Earnings

• +5.0% Rhythm Biosciences (RHY) – Breast cancer diagnostic test

• +3.5% Anson Resource (ASN) – Review of Green River Lithium Project

• +2.7% Thorn Group (TGA) – Enters scheme with Somers

• +2.1% Deterra Royalties (DRR) – Upgraded by Morgan Stanley

• +0.5% Ingenia Communities (INA) – Talks to sell WA assets  

Trading lower

• -17.5% Invictus Energy (IVZ) – Placement at 15 cents

• -5.6% Opthea  (OPT) – Completes entitle offer

• -4.1% IGO (IGO) – Downgraded by Morgan Stanley

• -4.0% Capricorn Metals (CMM) – Initiated neutral at BofA

• -3.7% Transurban (TCL) – ACCC opposes acquisition of interest in Horizon Roads

Broker notes

UBS on rare earths:

• “US$50-55/kg could be a support level for now based on producer buying not costs.”

• “Myanmar imports back to 50% of its peak and Covid type levels but environmental interruptions to southern producers may only be rumours.”

• “With improved but still relatively weak demand in the 2H only a modest improvement in prices is expected from here.”

• “Our long term remains US$95/kg and we continue to forecast a steady 2-3 year recovery to this level.”

• “We remain Neutral Rated on LYC (PT $8.00/sh) but are warming to it at current levels given the positive noise coming out of Malaysia. We remain Sell rated on ILU (PT$8.25/sh) with the expectation of minerals sands prices rolling over and ahead of Eneabba FEED update and project execution.”

Morgan Stanley on Australian materials:

• “Ally and copper inventories remain far below historical averages. We are tactically bullish on base metals with Cu surpluses largely disappearing in 2023/2024.”

• “Chinese policy support is improving demand outlook, with base metals in poll position (S32, RIO, 29M to Overweight).” 

• “Iron ore benefits too but tactically overdone, selective opportunities (RIO, DRR to Overweight). 

• “Analysts (Jack Lu/Tim Hsiao) currently see high battery inventories, and we think this could cause weaker battery materials demand into '24. We see pressure on lithium and nickel prices.” 

Scans