Market Wraps

Evening Wrap: ASX 200 falls on scorching hot inflation report, US futures lower

Wed 25 Jan 23, 5:58pm (AEST)

The S&P/ASX 200 closed 22 points lower, down -0.3%.

A hotter-than-expected inflation print snaps a five-day winning streak, tech and energy stocks underperform, Mineral Resources Q2 results miss expectations and a new look for our broker notes section.

Let's dive in.


Today in Review

Wed 25 Jan 23, 4:48pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,468.3 -0.30%
All Ords 7,688.0 -0.29%
Small Ords 3,015.2 -0.23%
All Tech 2,164.6 -1.34%
Emerging Companies 2,290.5 -0.20%
Currency
AUD/USD 0.7105 +0.83%
US Futures
S&P 500 $4,014.75 -0.45%
Dow Jones $33,734.0 -0.27%
Nasdaq $11,817.75 -0.77%
Name Value % Chg
Sector
Utilities 8,062.9 +0.49%
Consumer Discretionary 2,991.2 +0.41%
Financials 6,665.1 +0.32%
Industrials 6,495.0 +0.14%
Consumer Staples 12,921.1 -0.39%
Health Care 42,832.9 -0.52%
Real Estate 3,226.3 -0.57%
Communication Services 1,477.1 -0.69%
Materials 19,315.6 -0.74%
Information Technology 1,453.4 -1.20%
Energy 11,459.5 -1.21%

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Markets

XJO 2023-01-25 17-05-39
ASX 200 (Source: TradingView)

It was 11:30 am AEDT and investors were keen to see the disinflation narrative continue to play out. Bam – a scorching hot inflation print comes out – causing the ASX 200 to fall from 0.15% to -0.50% around 12:00 pm.

  • The Australian Government 10-year yield surged 11 bps to 3.51%

  • The Australian dollar spiked 0.8% to 70.9 US cents

  • Economists including AMP's Shane Oliver and ANZ's Catherine Birch both expect another 25 bp hike in March, taking the cash rate to 3.35%

Economy

Australia’s inflation came in much hotter-than-expected, up 1.9% in the December quarter and 7.8% year-on-year.

  • Consensus expected inflation to rise 1.6% for the quarter and 7.5% year-on-year

  • The most significant contributors to the rise were Domestic holiday travel and accommodation (+13.3%), Electricity (+8.6%) and International holiday travel and accommodation (+7.6%)

  • "Strong demand, particularly over the Christmas holiday period, contributed to price rises for domestic holiday travel and international airfares.” - Michelle Marquardt, ABS head of price statistics

  • "Labour and material costs are driving price growth in this area, with signs of material cost pressures easing.” 


Latest news


Post market review

The market finally experienced a pullback but from the left-field inflation report. We've seen this disinflation narrative build up a lot of momentum in the face of things like Fed officials sticking to their higher-for-longer messaging. So what happens when reality doesn't quite align with expectations?

Still, the ASX 200 has been on a relentless rally and this pullback provides an opportunity to show us the underlying health of the market.

Tech: Growth and tech names have been trying to bottom out but now this hotter-than-expected inflation print has pulled back those 'long duration' stocks. Heavyweight Wisetech (WTC) held up relatively well, up 0.1%. But most other large cap names were down between 0.5% to 3.0%.


Interesting news and movers

Trading higher

  • Accent Group (AX1) +10.2% – 1H trading update

  • Myer (MYR) +5.6% – 5 month trading update (yesterday)

  • Monadelphous (MND) +5.4% – Upgraded to Overweight by JP Morgan

  • Magnis Energy (MNS) +4.7%

  • Mader (MAD) +4.3% – Continuation rally, up more than 10% in last three days

  • Neometals (NMT) +2.3% – Signs critical collab with Australian vanadium 

Trading lower 

  • St Barbara (SBM) -21.4% – Q2 gold production report

  • West African Resources (WAF) -7.5% – Q4 activities report

  • OFX Group (OFX) -6.7% – Q3 trading update (yesterday)

  • Weebit Nano (WBT) -5.6% – Q2 net cash from/(used in) operating activities report

  • Mincor (MCR) -5.1% – Downgraded to Neutral by Macquarie (yesterday)

  • Mineral Resources (MIN) -2.2% – Q2 production and guidance report


Broker updates 

Telstra – “Roaming towards an upgrade"

  • Macquarie: Outperform rated with a $4.50 target price

  • Notes: “However, we believe the monetisation of Telstra’s FibreCo will be a catalyst for the stock in the next 6-12 months. In addition, we expect a positive result in February 2023 as subscriber numbers are likely to be a positive surprise to consensus.”

Evolution Mining – Q2 production results miss expectations

  • CSLA: Target raised to $3.45 but downgrades rating to Underperform from Outperform

  • Notes: Raises valuation on gold price appreciation but downgrades rating due to strong price rally

29Metals – “A difficult year ahead” 

  • Macquarie: Target price was $1.40 with an Underperform rating

  • Notes: 4Q22 produced 8,000 tonnes of copper which missed analyst estimates by 2%. CY23 production was in-line with expectations but costs were higher than expected. Operational issues continue to exist at both Golden Grove and Capricorn

Lunnon Metals – “Catalyst rich going into 3Q23”

  • Macquarie: Outperform rated with a $1.30 target price

  • Notes: Upcoming catalysts include Warren Mineral Resources estimate and Barker maiden reserve in Q3 FY23. The company also had $25.1m cash at the end of December 2022

Zip Co – “Finding ice for the burn”

  • Macquarie: Underperform rated with a $0.55 target price

  • Notes: Cash burn is moderating but Zip is close to finishing its cost cutting efforts. The $330m of remaining convertible notes due on Apr-25 were a ‘material overhang’


Scans

Top Gainers

Code Company Last % Chg
M8S M8 Sustainable Ltd $0.011 +37.50%
WFL Wellfully Ltd $0.02 +33.33%
SKY SKY Metals Ltd $0.066 +32.00%
LML Lincoln Minerals Ltd $0.045 +28.57%
ASN Anson Resources Ltd $0.243 +27.63%
View all top gainers

Top Fallers

Code Company Last % Chg
LBY Laybuy Group Hold... $0.039 -35.00%
CLU Cluey Ltd $0.35 -22.22%
SBM ST Barbara Ltd $0.71 -20.23%
MM1 Midas Minerals Ltd $0.165 -15.39%
CR9 Corella Resources... $0.028 -15.15%
View all top fallers

52 Week Highs

Code Company Last % Chg
SKY SKY Metals Ltd $0.066 +32.00%
LML Lincoln Minerals Ltd $0.045 +28.57%
WR1 Winsome Resources... $2.22 +16.54%
GBE Globe Metals & Mi... $0.10 +16.28%
T92 Terra Uranium Ltd $0.45 +12.50%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
LBY Laybuy Group Hold... $0.039 -35.00%
CLU Cluey Ltd $0.35 -22.22%
AU1 The Agency Group ... $0.026 -13.33%
OPN Openn Negotiation... $0.069 -12.66%
IXU Ixup Ltd $0.028 -12.50%
View all 52 week lows

Near Highs

Code Company Last % Chg
SMLL Betashares Aust S... $3.62 +0.28%
OZBD Betashares Austra... $44.71 -0.13%
AN3PI Australia and New... $102.80 -0.06%
SLR Silver Lake Resou... $1.46 -2.34%
PCI Perpetual Credit ... $0.98 0.00%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
LNK Link Administrati... $1.945 -1.02%
IXI Ishares Global Co... $84.21 -1.51%
REG Regis Healthcare Ltd $1.755 -0.28%
BBOZ Betashares Austra... $3.24 +0.62%
NEW NEW Energy Solar Ltd $0.20 0.00%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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