Evening Wrap: ASX 200 falls on bank and mining weakness, RBA minutes flag tightening bias

The S&P/ASX 200 closed 34 points lower, down -0.47%. 

The Index fell for a second straight day amid weakness from large cap stocks like BHP and Commonwealth Bank, energy was the only sector to finish higher thanks to an uptick in oil prices, the RBA weighed up raising the cash rate earlier this month but ultimately decided to leave rates unchanged, a few gold stocks break out as spot prices eye a key level and a few Macquarie notes of interest.

Let's dive in.

ASX 200 Session Chart

ASX 200 falls amid relatively uneventful Tuesday trade (Source: Market Index)

Markets

• ASX 200 finished lower and near worst levels on Tuesday

• Another somewhat heavy session with relatively broad-based weakness

• Heavyweight stocks dragged the market lower, notably BHP (-1.4%), Fortescue (-1.1%), CSL (-0.8%), ANZ (-0.9%) and CBA (-0.5%)

• Singapore iron ore futures fell for a second consecutive session, down 0.9% to US$120.6 a tonne from last week's high of US$123.75

• Energy was the only sector to finish in positive territory, Brent crude briefly pushed above US$95 a barrel for the first time since November 2022

Economy

The RBA released its September Monetary Policy Meeting minutes. Here are the key takeaways:

• Inflation outlook: “Many central banks in advanced economies expected inflation to moderate further and return to target during 2025.”

• Growth outlook: “Growth in household consumption had slowed in the June quarter in many advanced economies and timely indicators suggested the slowing had continued into the September quarter.”

• Upside risks: “Members noted that the recent rise in petrol prices – an important input for households’ inflation expectations – highlighted that the process of returning inflation to target could be uneven.”

• Interest rate outlook: “Members recognised the value of allowing more time to see the full effects of the tightening of monetary policy since May 2022, given the lags in the transmission of policy through the economy … further tightening in policy may be required should inflation prove more persistent than expected.” 

Latest news

Nothing Much To See Here

Markets are in a somewhat bearish lull phase, with the ASX 200 easing below the key 7,200 level. It's a bit of a waiting room ahead of a few upcoming catalysts such as:

• UK inflation at 4:00 pm Wednesday

• Fed interest rate decision at 4:00 am Thursday

• UK interest rate decision at 9:00 pm Thursday

• Bank of Japan interest rate decision at 1:00 pm Friday

That said, it's a somewhat bearish backdrop as yields are on the verge of breaking out and oil prices continue to push through psychological price points (e.g. Brent crude hitting US$95 for the first time since November).

Gold is one of the more interesting places on the market at the moment. And spot prices are beginning to creep up against a key trendline.

Gold daily chart (Source: TradingView)

The unfortunate thing is that not all gold stocks are created equal and household names like Northern Star (ASX: NST) and Evolution Mining (ASX: EVN) have for the most part been rather choppy for the past two months.

The Monday Morning Wrap noted a few goldies that have managed to push: "For those that like charts, Ramelius Resources (ASX: RMS), Emerald Resources (ASX: EMR) and Gold Road (ASX: GOR) are names that are trying to break out towards June highs."

And two of those names managed to break out on Tuesday.

Ramelius Resources daily chart (Source: TradingView)

Emerald Resources daily chart (Source: TradingView)

Gold Road daily chart (Source: TradingView)

Interesting news and movers

Trading higher

• +10.5% Tuas (TUA) – Earnings

• +3.2% Comet Ridge (COI) – Gas sales agreement

• +2.1% New Hope (NHC) – Earnings

Trading lower

• -16.0% Lindian Resources (LIN) – Drill results (Mon)

• -4.5% Block (SQ2) – Square CEO departure

Broker notes

A few standalone Macquarie notes of interest:

Evolution Mining (EVN) – Underperform with $3.50 target ($3.76 at 15 Sep close)

• “EVN maintained commentary of Red Lake having to "earn the right to grow" which seems to imply that, for now, capital is better spent elsewhere.”

• “While Red Lake's performance has been underwhelming, the mine appears to be stabilising, and we see a pathway to sustainable production of ~200kozpa.”

Perseus Mining (PRU) – Outperform with $2.60 target ($1.75 at 18 Sep close)

• “PRU released its updated Yaouré LOMP, with production and costs largely in line with our expectations, while capex was higher.”

• “UG development capital costs of US$131.7m were 63% higher than our prior expectation of US$80.9m.”

• “higher. PRU maintains robust financial metrics, with an FY24E EV/Ebitda of 2.1x and FCF yield of 19%.”

Australian General Insurance:

• “Youi 2H23 GWP growth (+12.3%) for personal lines vs market average of +15.4%, +13.7% for SUN and +14.9% for IAG (Personal Lines only).”

• "Youi achieved +24.5% GWP growth in 2H23 vs. pcp incorporating both organic growth for personal lines in the direct channel …”

• “Affordability issues should increase churn and once again pressure market share for incumbents. We believe IAG’s Underlying ITR Margin improvement will be easier to achieve than SUN.”

Scans