Evening Wrap: ASX 200 higher on Energy & Miners, Uranium stocks soar

The S&P/ASX 200 closed 57 points higher, up 0.85%. 

Blame it on end-of-month versus start of month fund flows, blame it on the welcome rally in US stocks overnight, blame it on a positive comments from Chinese officials about resolving their debt problem, or blame it on the fact November is just a darn good month…either way, Aussie stocks were up today and that's OK with us!

Let's dive in.

ASX 200 Session Chart

ASX 200 higher, finished at best levels (Source: Market Index)

Markets

Finally a decent gain for the Aussie market. Even better, stocks held onto those gains into the close. We haven't had such a strong gain/close since 11 October. The norm had become closes towards the lows of the session, and in many cases, this meant giving up early gains. From a technical analysis standpoint, a strong close typically indicates unfulfilled excess demand. All things being equal, there's every chance that demand picks up where it left off the next day. Fingers crossed.

Breadth is also an important indicator of market strength, and today's rally appeared to be a broad one. 9 of the 11 major sector indices rose today and gainers in the ASX300 outweighed losers by a margin of 1.8 to 1. The two best sectors today, Property (XPJ) +1.8% and Healthcare (XHJ) +1.4% have been the second worst and worst performers respectively over the last 12-months. You could call this bottom fishing. Goodman Group (ASX: GMG) rose 2.2%, Scentre Group (ASX: SCG) rose 1.6%, while Resmed (ASX: RMD) recovered 4.2%, Cochlear (ASX: COH) added 1.4%, and CSL (ASX: CSL) gained 1.1%.

Also bouncing well were Energy (XEJ) +1.1% and Materials (XMJ) +1.1% on the back of the readout from today's CCP policy meeting in Beijing. These readouts are usually jawboning, but any good news on China's property market - which is what we got today - is going to be cheered. Basically, Beijing signalled it would not let the property market and local government debt issues play out without some assistance - which many had feared up to this point could be the case. BHP Group (ASX: BHP) added 1.5%, Rio Tinto (ASX: RIO) gained 2.4%, and Woodside Energy (ASX: WDS) rose 1.3%.

Economy

The Caixin Manufacturing PMI is the private sector version of the official PMI's reported by China's National Bureau of Statistics yesterday. The Caixin survey confirmed China's manufacturing sector has indeed slumped back into contraction in October. The index came in at 49.5, down from September's 50.6 and below economists' forecasts for a 50.8 print.

Also weaker in October, was US consumer confidence. The Conference Board Consumer Confidence Index fell to 102.6, down from September's 104.3 (upwardly revised from 103.0). On a positive note, the reading was better than economists' forecasts for a 100.5 print.

Tonight watch out for ADP Non-Farm Employment Change. This is the private sector version of Friday's all important official Non-Farm Payrolls data. Consensus is for 149,000 jobs created last month, up from 89,000 in September.

Latest news

A bit of haves vs have-nots for stocks news today given there were two groups of stocks heading in 180 degree polar opposite directions.

Haves: ASX Uranium Stocks

As a trend follower, there's nothing I love more than a bottom-left-top right chart. Uranium futures certainly tick the box here and have been on a rocket emoji tear this year. Growing restocking by power utilities amidst moderate supply after a decade of underinvestment and mine shutdowns is finally starting to have a meaningful impact on the spot price. US$72.05/lb was the last major resistance point to clear. There's plenty of blue-sky here, but keep in mind we're at "economically viable" prices for a substantial amount of mothballed supply. It will take a while for this supply to hit the market, though. ASX-listed uranium stocks today: Boss Energy (ASX: BOE) +4.9%, Paladin Energy (ASX: PDN) +7.9%, Deep Yellow (ASX: DYL) +6.8%, Bannerman Energy (ASX: BMN) +9%, Elevate Uranium (ASX: EL8) +15.6%, Lotus Resources (ASX: LOT) +15.2%.

Have-Nots: ASX Coal Stocks

Newcastle Thermal Coal futures are trading at their lowest levels since shortly after Russia's invasion of Ukraine. At around US$120/t they're down around 70% from their September 2022 peak. Sounds bad, but really it's just a statistic. In the long run, coal prices tend to trade around US$80/t. So if the glass if half-full, current prices remain well above the long run and coal companies can continue to reap excess returns. But if the glass is half-empty, the chart says prices are headed back to the long run. ASX-listed coal stocks today: New Hope Corporation (ASX: NHC) -4.5%, Whitehaven Coal (ASX WHC) -1.6%, Yancoal Australia (ASX: YAL) -1.4%, Terracom (ASX: TER) -6.8%.

Interesting news and movers

Trading higher

• +10.4% Novonix (NVX) – Finalises $100m grant award from DoE

• +8.9% Chalice Mining (CHN) – Q1 cash flows (Tue)

• +7.7% Regal Partners (RPL) – Acquires 50% of Taurus Funds Management

• +6.4% Mader (MAD) – Broker upgrades

• +4.6% Azure Minerals (AZS) – Q1 cash flows (Tue)

• +4.0% Nickel Industries (NIC) – Citi upgrade

• +3.3% Symbio (SYM) – ABB to acquire at $3.01 per share

Trading lower

• -32.5% Paradigm Biopharmaceuticals (PAR) – Placement (Tue)

• -22.2% Base Resources (BSE) – Canaccord Genuity downgrade

• -12.9% Kazia Therapeutics (KZA) – Q4 cash flows, to raise $500,000

Broker notes

UBS on Sonic Healthcare (SHL)

• Buy with $36.50 target ($28.86 at Oct 27)

• Management briefing notes reiterate analysts Buy thesis and left them feeling “incrementally more positive for two reasons: (1) continued digitisation rollout and expansion of uses for AI and (2) straight in testing pipeline with increasing focus on offerings where the company has pricing power

UBS on Cochlear (COH)

• Neutral with $260.00 target ($242.51 at Oct 27)

• Cochlear hosted its first Capital Markets day since 2019 and left analysts feeling little changed with management reaffirming mid-term guidance of 10% annual sales growth

• “The shares are trading at c.44x UBSe FY24 EPS. We see no near-term catalysts to drive a downward re-rating and acknowledge continued dominance of a strategic med-tech niche, but continue to watch programmes for the clinical development of maternal vaccines against human cytomegalovirus.”

UBS on Endeavour Group (EDV)

• “1Q24 Total sales A$3.1bn, +2.1%, broadly in line with UBSe and market consensus. Retail sales A$2.5bn, +1.9%, above mkt (+1.5%) yet below UBSe (+2.4%).”

• “Retail sales growth slowed during 1Q24 as fewer items per basket outweighed increased shopping frequency & higher average item prices, with ~5% inflation indicating negative real LFL sales growth.”

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