Market Wraps

Evening Wrap: ASX 200 gives back early strength + China's producer prices tumble

Mon 10 Jul 23, 5:08pm (AEST)

The S&P/ASX 200 closed 38 points lower, down -0.54%. 

The Index tumbles from a positive start, China's underwhelming consumer prices signal weak economic growth, gold stocks catch a bid, Morgan Stanley initiates upbeat coverage for ASX-listed insurers and UBS expects ASX 200 EPS to fall 3.2% this year.

Let's dive in.


Today in Review

Mon 10 Jul 23, 4:48pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,004.0 -0.54%
All Ords 7,206.9 -0.51%
Small Ords 2,757.3 -0.07%
All Tech 2,359.7 -0.08%
Emerging Companies 2,082.6 -0.59%
Currency
AUD/USD 0.6648 -0.66%
US Futures
S&P 500 $4,415.25 -0.42%
Dow Jones $33,832.0 -0.31%
Nasdaq $15,098.5 -0.55%
Name Value % Chg
Sector
Information Technology 1,763.4 +0.21%
Financials 6,077.2 -0.27%
Energy 10,684.6 -0.46%
Communication Services 1,514.7 -0.47%
Consumer Discretionary 2,838.9 -0.47%
Utilities 8,745.2 -0.50%
Real Estate 2,971.0 -0.66%
Materials 17,435.9 -0.67%
Health Care 39,589.7 -0.74%
Industrials 6,603.3 -0.94%
Consumer Staples 12,959.9 -1.00%

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ASX 200 Session Chart

S&P ASX 200 (LIVE DATA) Share Prices & Charts - Market Index
ASX 200 fades early gains to finish at worst levels (Source: Market Index)

Markets

What a miserable day for the Index. The session started strong, with the ASX 200 up 0.6% but momentum was in the opposite direction. The key drag on markets was China's underwhelming inflation where, most notably the sharp decline in producer prices, which was -5.4% year-on-year in June. This marks the fastest rate of decline since December 2015. A heavyweight name like BHP was up 1.2% in early trade, slumped to around -0.3% after China's inflation print at 11:30 am AEST and spent the rest of the day trending lower, finishing down 1.1%.

We've been noting the pick up in volatility in the past few sessions and what was supposed to be a bounce back session turned into another tumble into no man's land. The market remains in a challenging spot as it tries to juggle renewed higher-for-longer narratives (thanks to strong US economic data), China's deflation problem as well as US earnings season (which kicks off this week).

Economy

China’s inflation rate fell to 0% in June from 0.2% in May.

  • Below expectations of inflation staying unchanged at 0.2%

China’s producer price index decelerated to -5.4% in June from -4.6% in May.

  • Below expectations of a fall to -5.0%

  • Marks the ninth consecutive decline in annual producer prices

  • Likely heightens expectations of more forceful stimulus from a Politburo meeting later this month


Latest news


Interesting news and movers

Trading higher

  • +11.7% Vista Group (VGL)

  • +9.9% Melba Energy (MAY)

  • +8.4% Leo Lithium (LLL)

  • +5.4% Cettire (CTT)

  • +4.6% Talga Group (TLG)

  • +4.1% Meteoric Resources (MEI) - Expansion of Caldeira REE Project

  • +4.0% Monadelphous (MND)

  • Gold sector move: Westgold (+5.3%), Bellevue Gold (+5.1%), Northern Star (+1.8%), Gold Road (+1.7%), Newcrest Mining (+1.1%)

Trading lower

  • -14.5% Nexted Group (NXD) - FY23 Guidance

  • -5.5% Strandline Resources (STA) - Seventh shipment of HMC completed

  • -6.7% Macmahon (MAH)

  • -3,8% PointsBet (PBH)

  • -3.3% MetalsX (MLX)

  • -3.1% Tabcorp (TAH)

  • -2.9% Arafura Rare Earths (ARU)


Broker notes

Morgan Stanley on Insurance Brokers:

  • “We initiate on the insurance brokers with a positive stance. We find the industry dynamics in broking attractive, despite the recent increase in multiples.”

  • “They offer strong operating leverage with no balance sheet risk and capital-light business models, making them relatively defensive and high growth at the same time.”

  • “Trading multiples of 17-23x FY25E P/E (UNPAT) or 15-21x (UNPATA) are reasonable in light of projected 10- 17% EPS growth.”

  • “We initiate AUB at Overweight. We think AUB has the best opportunity for earnings growth and yet is cheap vs peers.”

  • “We initiate PSC Insurance Group at Overweight: PSI offers attractive medium-term growth & its "one-team" model drives above-peer margins.”

  • “We Initiate Steadfast Group at Equal-weight: SDF is a strong beneficiary of the hard pricing cycle and has a dominant position in the Australian market with its leading domestic broker network, but we think the valuation is full.”

UBS on earnings expectations:

  • Company downgrades to forward earnings estimates have “slightly” outnumbered upgrades in the past four weeks

  • The magnitude of disappointments have been noticeable and UBS has downgraded ASX 200 year-on-year earnings growth by 0.6% and 1.4% for FY23 and FY24 respectively

  • FY24 ASX 200 EPS growth forecasts now sit at -3.2% year-on-year

  • “Worryingly, we note that previous recession periods saw the Consumer Discretionary and Bank sectors post earnings growth reversals of more than 10% year-on-year.”

  • The investment bank suggests owning the sectors detached from recession risks, including a) exposure to non-cyclical channels (e.g. overweight Technology and Insurance) and b) exposure to income equities that pay high and stable dividends (e.g. overweight infrastructure, utilities and insurance)


Scans 

Top Gainers

Code Company Last % Chg
HVY Heavy Minerals Ltd $0.22 +100.00%
A8G Australasian Meta... $0.20 +42.86%
AJX Alexium Internati... $0.018 +38.46%
CSF Catalano Seafood Ltd $0.05 +25.00%
MKL Mighty Kingdom Ltd $0.021 +23.53%
View all top gainers

Top Fallers

Code Company Last % Chg
GRE Greentech Metals Ltd $0.43 -27.73%
ONE Oneview Healthcar... $0.17 -27.66%
GSM Golden State Mini... $0.033 -21.43%
BXN Bioxyne Ltd $0.016 -20.00%
WYX Western Yilgarn NL $0.15 -18.92%
View all top fallers

52 Week Highs

Code Company Last % Chg
HVY Heavy Minerals Ltd $0.22 +100.00%
S2R S2 Resources Ltd $0.19 +18.75%
MLG MLG OZ Ltd $0.72 +15.20%
BOT Botanix Pharmaceu... $0.145 +11.54%
LLL Leo Lithium Ltd $1.22 +8.44%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
NOX Noxopharm Ltd $0.036 -14.29%
RNT Rent.com.Au Ltd $0.02 -9.09%
DGR DGR Global Ltd $0.034 -8.11%
AV1 Adveritas Ltd $0.042 -6.67%
GBZ GBM Resources Ltd $0.015 -6.25%
View all 52 week lows

Near Highs

Code Company Last % Chg
VLUE Vaneck MSCI Inter... $23.01 -0.43%
SEMI Global X Semicond... $11.40 -0.96%
SLA Silk Laser Austra... $3.31 -0.30%
NHF Nib Holdings Ltd $8.48 -0.59%
XARO Activex Ardea Rea... $24.45 -0.29%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
OZBD Betashares Austra... $42.67 -0.12%
GOVT SPDR S&P/ASX Aust... $23.01 -0.09%
CSL CSL Ltd $264.12 -1.04%
VBND Vanguard Global A... $40.47 -0.10%
APZ Aspen Group $1.67 -2.91%
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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