Evening Wrap: ASX 200 falls, investors dump lithium stocks, US futures mixed

The S&P/ASX 200 closed 47 points lower, down -0.64%.

The local sharemarket gave back all of Wednesday's gains, lithium stocks sold off after Pilbara Minerals flagged a potential peak in spot prices, Credit Suisse downgrades three key retail stocks and Australia's unemployment rate holds steady at 3.4 per cent.

Let's dive in.

Markets

The ASX 200 helplessly closed at session lows after a hawkish Powell said "we're not at a restrictive enough stance even with today's move" and signalled to more "ongoing increases" to combat inflation.

• Materials led to the downside with notable falls from lithium heavyweights Pilbara Minerals (-10.9%), Allkem (-5.1%) and Mineral Resources (-4.9%)

• Discretionary stocks were under pressure after Credit Suisse downgraded retailers including JB Hi-Fi (-3.0%), Breville (-3.9%) and Harvey Norman (-2.3%) citing a deteriorating near-term earnings outlook for companies exposure to household goods

• Real Estate was another area of weakness, with a spike in bond yields to blame. The Australia Government 10-year Yield has jumped from 3.38% to 3.46%

• An awkward mix of defensive and growth outperformed benchmarks: Staples, Energy and Tech

• 140 of the top 200 declined (70%)

Economy

Australia’s unemployment rate was unchanged at 3.4% in November.

• "The participation rate increased by 0.2 percentage points to 66.8 per cent in November, returning to the record high we saw in June 2022. It was 1.0 percentage point higher than before the pandemic.” - Bjorn Jarvis, Head of Labor Statistics at the ABS

• "The record high participation rate continues to show that it is a tight labour market, especially when coupled with very low unemployment.”

China released a slew of economic data, all of which missed analyst expectations.

• Industrial production rose 2.2% year-on-year in November vs. 3.6% expected

• Retail sales fell -5.9% in November vs. -3.7% expected

• Fixed asset investment rose 5.3% in November vs. 5.6% expected

Commodities 

“Commodity markets were cautious going into the FOMC decision. Gains were led by energy, where signs of strong demand are starting to emerge,” said ANZ senior commodity analyst, Daniel Hynes. 

Iron ore futures +0.3% to US$109.2 a tonne despite China's steel production falling -6.5% month-on-month to 74.5m tonnes in November.

Latest news

Post market brief

A weak session but the ASX 200 appears to be respecting recent lows and the 20-day moving average, for now.

There was a bit of volatility from the open through to noon. But after that ,the market just drifted lower. Is this what illiquid Christmas price action looks like?

XJO intraday chart (Source: TradingView)

Most lithium name sold off on Thursday after Pilbara Minerals' spodumene auction results fell -3.2% month-on-month from a record US$7,805/t in November to US$7,552/t. The concerns about peak lithium prices alongside the end of China's EV subsidy (1 January 2023) sparked a sector wide selloff.

A few wraps ago, we noted how names like Allkem and Pilbara Minerals had fallen to key inflection points. These were key areas that found support during previous selloffs. Today's sharp decline cements this 'roll over'. Could this mark a near-term top for the hot sector?

Pilbara Minerals (Source: TradingView)

Allkem (Source: TradingView)

Major announcements

Larger caps (>$1bn)

• APM Human Services (APM) +4.5%: Enters into a binding agreement to acquire 100% of Everyday Independence, a leading NDIS provider of Allied Health Services for $52.5m 

• Auckland Airport (AIA) -0.5%: Reaffirmed that it has no intentions to carry out an equity raise and plans to fund a new domestic terminal with debt

• Select Harvests (SHV) -2.9%: Guided to 30,000 tonnes of almond harvest for FY23 compared to 29,250 tonnes in FY22. Management said weather conditions have been cooler and wetter than normal, tree health remains ‘good’ 

• Pilbara Minerals (PLS) -11.4%: Spodumene concentrate auction sold a 10,000 tonne cargo for US$7,552/t, down -3.2% month-on-month 

Mid-to-small caps

• Appen (APX) +1.5%: Appoints Armughan Ahmad as CEO effective from no later than 30 January 2023. Ahmad was formerly the President and Managing Partner of Digital at KPMG Canada

• Global Lithium (GL1) -1.0%: Delivered a 148.5% resource increase to 50.7m tonnes at its Manna and Marble Bar hard-rock lithium projects in WA. The company notes “significant scope”  to further grow its resource in the near-term 

• Australian Ethical (AEF) -10.8%: Expects 1H22 underlying profit after tax to be $4.5m to $5.0m, down from $5.4m a year ago 

Broker updates 

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