Evening Wrap: ASX 200 flat, lithium stocks rally on Allkem merger, China has a deflation problem

Another uneventful and choppy session for the ASX 200, the tech index rallies to levels not seen since August 2022, lithium stocks experience a broad-based rally following Allkem's merger announcement with Livent, China's inflation comes in at just 0.1% year-on-year in April while producer prices were negative.

Let's dive in.

ASX 200 Session Chart

Another choppy day with the ASX 200 closing slightly lower (Source: Market Index)

Markets

Another choppy day for the ASX 200, closing slightly lower for a third straight session. Technology stocks continue to catch a bid, in-line with the strength we're seeing with the Nasdaq. Lithium was a major highlight for the day, with most names up at least 5% after the Allkem-Livent merger announcement. This was offset by weakness across major iron ore miners BHP (-1.0%), Rio Tinto (-1.7%) and Fortescue (-2.0%) as well as broad-based weakness across Utilities names like Origin Energy (-0.7%) and AGL (-0.9%).

Economy

China’s inflation rate fell to 0.1% year-on-year in April from 0.7% in March.

• Well below analyst expectations of 0.4%

• Declines in food inflation pushed the index below 1.0% for the first time in more than a year and raises concerns about deflation 

• Core inflation, which excludes food and energy, remained steady at 0.7% year-on-year

China’s producer price index fell 3.6% year-on-year in April after dropping 2.5% in March.

• Below analyst expectations of a 3.2% decline

• Marks the seventh consecutive decline

• Producer prices are falling at the fastest rate since May 2020

Latest news

Market Insights: Oh lithium

What a crazy day and time it is for the lithium sector.

When spot prices were under pressure, Albemarle lobbed a few low ball offers at Liontown. When spot prices started to recover ... well ... lithium stocks also started to recover.

Allkem experienced its highest turnover ever, with 17.9 million shares traded. It closed 15.7% higher, which was a little off session highs of 18.6%.

In terms of other lithium stocks that performed well:

• Brine players in Argentina: Lake Resource s (+12.8%), Galan Lithium (+21.9%)

• Hardrock players in Aus: Global Lithium (+12.0%), Core Lithium (+8.8%), Pilbara (+5.1%)

• Hardrock players in Canada: Patriot Battery (+12.0%), Winsome (+7.5%)

And things that didn't perform well:

• Leo Lithium (-1.6%) which has a hardrock project in Mali

• Arizona Lithium (-2.2%) which has been on a massive slide since February

• Vulcan Energy (-3.5%) which completed a capital raise last Friday

Interesting news and movers

Trading higher

• +6.7% Frontier Digital (FDV) – Completes SPP

• +10.0% Graincorp (GNC) – Earnings

• +6.7% Pointsbet (PBH)

• +1.8% Alpha HPA (A4N) – Continuation rally, up 11% in previous three

• Lithium sector move: Galan Lithium (+21.9%), Allkem (+15.7%), Lake Resources (+12.8%), Global Lithium (+12.0%), Patriot Battery Metals (+12.0%), Core Lithium (+8.8%)

Trading lower

• -5.4% Genesis Minerals (GMD) – SLR revised bid for SBM assets

• -3.9% Block (SQ2)

• -3.8% Novonix (NVX)

• -2.8% CSR (CSR) – Downgraded by multiple brokers

Broker notes

Broker notes are not available today.

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