Evening Wrap: ASX 200 flat, copper stocks tumble, CSL hits a 3-month high

The market finishes the week 0.5% higher, UK's GDP unexpectedly contracts in March, Materials and Energy stocks struggle amid falling commodity prices, analyst takeaways on Allkem and Graincorp and copper rolls over to a fresh six month low.

Let's dive in.

ASX 200 Session Chart

Another session where the ASX 200 was little changed (Source: Market Index)

Markets

Another uneventful session. This marks the fourth session in a row where the market has refused to close around session lows. But doesn't want to close much higher either. Healthcare stocks led to the upside, with CSL (+1.4%) closing at a 3-month high. Technology continues to outperform and Wisetech (+1.1%) closed at an all-time high. This was offset by weakness across Energy and Materials.

Economy

UK GDP rose 0.2% year-on-year in the first quarter of 2023.

• In-line with consensus expectations

• GDP fell 0.3% month-on-month in March, below expectations of no change

• March contraction was driven by a 0.5% decline in the services sector

Latest news

Market Insights

Allkem and Livent merger: Analyst takeaways

Most analysts were positive on the deal, with the view that the the merger will create a bigger and more diversified lithium producer. Several brokers said that this deal could serve as a catalyst for more M&A in the sector, especially towards more advanced lithium companies. A few key takeaway from various brokers:

• RBC Capital Markets: Transaction expected to speed up M&A in the sector, most significant upside expected at Allkem's Argentinian brine ops due to its substantial resource

• Raymond James: Livent's portion of the deal explained by its fast expansion of downstream capacity

• CLSA: Allkem loses its M&A premium or possibility of exploring a US listing, the merger appears to discount some of Allkem's upside.

• Jefferies: Transaction could yield better returns given the possibility of accelerating project timeline and synergies, Mt Cattlin is an asset that does not fit the Argentina/Canada narrative

Graincorp's half-year earnings: Analyst takeaways

Graincorp posted better-than-expected earnings on Thursday and the stock is up more than 15% in the last two sessions. Analysts highlighted the strong EBITDA and net profit figures, driven by higher volumes and improved margins. A few key takeaways:

• Macquarie: Cautious on development of El Nino patterns in late 2023, strong balance sheet provides opportunities for capital management, flagged weak global wheat prices and Russian grain supply increases as potential headwinds

• Wilsons: Expects solid grain volumes to underpin strong earnings over the next 18 months

• The average target price across 8 sell-side analysts was raised by 2.3% to $9.00

Copper: A break towards the downside

Dr Copper is having a little bit of a breakdown, taking out a key support area and falling 3.4% overnight to US$3.71/lb. This was after China posted its lowest inflation print in more than two years and wholesale prices deflated 3.6% year-on-year.

Copper inventories in LME-registered warehouses have been on the rise, up to 75,950 tonnes on Thursday, the highest since March.

Copper (Source: TradingView)

Interesting news and movers

Trading higher

• +21.4% Latin Resources (LRS)

• +13.0% Lake Resources (LKE) – Continuation rally, up 10.6% in previous three

• +8.0% Zip (ZIP)

• +5.9% Graincorp (GNC) – Earnings (Thurs)

• +4.7% News Corp (NWS) – Earnings

• +4.1% Appen (APX) – Bounce after down 27.3% in previous three

• +4.0% Propel Funeral Partners (PFP) – Acquisitions

Trading lower

• -11.5% Panoramic Resources (PAN)

• -7.4% Ardent Leisure (ALG)

• -6.0% Neometals (NMT)

• -4.4% QBE Insurance (QBE) – Q1 update

• Gold sector move: Ramelius (-6.3%), Evolution (-2.6%), Newcrest (-2.2%)

• Copper sector move: 29Metals (-5.7%), Sandfire Resources (-5.5%)

Broker notes

Broker notes are not available today.

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