Evening Wrap: ASX 200 higher, Tech index hits 12-month high + UBS' best stock ideas

The local sharemarket finished the week up 0.3%, the S&P/ASX 200 Tech Index rallies for a third consecutive session, Japan's inflation accelerates again to a four-decade high, Austal shares surge 25% after scoring a US$3bn contract with the US navy and UBS lists its best stock ideas, which combine company research with top-down thematics.

Let's dive in.

ASX 200 Session Chart

ASX 200 higher and closes near session highs (Source: Market Index)

Markets

The week started a little wobbly but we finished strong. The ASX 200 continues to benefit from the strength taking place on Wall Street, driven by themes such as tech outperformance and the stabilisation of the banking crisis. The S&P/ASX 200 Tech Index is up 6.2% in the last three sessions and led by names like Xero (+5.2%) and Brainchip (+8.7%) on Friday.

Economy

UK consumer confidence rose to -27 in May from -30 in the previous month.

• Fourth consecutive monthly increase amid easing inflation

• Remains downbeat but bouncing from a record low of -49 last September

Japan’s inflation accelerated to 3.5% year-on-year in April from 3.2% in the previous month. 

• Core inflation rose to 3.4% from 3.1% in March

• Inflation is rising at its fastest pace since September 1981

• Food prices jumped to 9.0% in April from 8.2% in March

Latest news

Market Insights: Technicals

A few technical and chart-related insights.

ASX 200: Tuesday and Wednesday flagged a break lower after five consecutive sessions of nothingness. The ASX 200 bounced sharply on Wednesday, which led to a strong two-day rally to close out the week. We're back to recent highs or rather, back to the inflection point. Next week will be interesting.

ASX 200 chart (Source: TradingView)

A phenomenal trender: XRF Scientific is a stock that seems to follow a pretty simple process. It breaks out, pulls back to the 50-day moving average, settles for a few days or weeks and breaks out again. The recent break out in April coincided with an upbeat March quarterly update.

XRF Scientific chart (Source: TradingView)

When the stock pulled back in late May, directors also started loading up.

Interesting news and movers

Trading higher

• +25.4% Austal (ASB) - US$3bn contract for US Navy

• +22.8% Delta Lithium (DLI)

• +5.9% AUB Group (AUB) – Placement

• +5.1% PointsBet (PBH)

• +4.6% Cettire (CTT) – Continuation rally, up 17% in previous three

• +4.4% Imugene (IMU) – FDA clearance

• +1.8% Core Lithium (CXO) – Approves funding for BP33

• Tech sector move:

Trading lower

• Coal sector move: Terracom (-4.7%), Whitehaven Coal (-4.3%), New Hope (-3.0%)

• Gold sector move: Newcrest (-1.9%), Evolution Mining (-1.6%), Northern Star (-1.0%)

Broker notes

UBS’ best stock ideas: “Our best ideas list aims to bring together up to 30 stocks that represent our team’s most and least preferred ideas for the next 12 months. The focus is on marrying the company research from our stock analysts, with the sector preferences and top-down thematics that our macro team provides.”

Most preferred Resources:

• AGL (ASX: AGL)

• APA Group (ASX: APA)

• IGO (ASX: IGO)

• Orica (ASX: ORA)

• South 32 (ASX: S32)

Most preferred Financials: 

• Netwealth (ASX: NWF)

• QBE Insurance Group (ASX: QBE)

• Steadfast (ASX: SDF)

• Suncorp (ASX: SUN)

“Given we see the equity market tracking sideways over coming months, income generating equities can provide a meaningful boost to portfolio returns.” 

Most preferred Industrials:

• IDP Education (ASX: IEL)

• Qantas (ASX: QAN)

• Seek (ASX: SEK)

• Seven Group (ASX: SWM)

• TPG (ASX: TPG)

• Transurban (ASX: TCL)

• Treasury Wine Estate (ASX: TWE)

• Webjet (ASX: WEB)

• Wesfarmers (ASX: WES)

• WiseTech (ASX: WTC)

• Worley (ASX: WOR)

Scans