Evening Wrap: ASX 200 on a three-day losing streak, lithium stocks smashed, Woodside tumbles

The S&P/ASX 200 closed 54 points lower, down -0.75%.

The local sharemarket extends its losing streak to three, defensive sectors held up relatively well and lithium stocks sold off after Goldman Sachs warned prices may fall in the second half of 2023.

Let's dive in.

Markets

The ASX 200 is down -2.05% in the last three sessions with no bounce in sight. We're seeing a rotation towards defensive and value pockets of the market, given the outperformance of sectors like Utilities and Staples.

• Three defensive sectors lead to the upside: Utilities, Real Estate and Staples

• Tech surprisingly held up relatively well, down just -0.40%

• Financials weighed on the Index, down almost 1.0%. Notable declines include NAB (-1.6%), ANZ (-1.7%) and Macquarie (-1.4%)

• Energy was the worst performing sector as oil prices hit a 12-month low

• 115 of the Top 200 declined (58%)

Economy

Australia’s trade surplus eased to $12.2bn in October from $12.4bn in September. 

• Goods and services credits (exports) fell $568m (0.9%) driven by non-monetary gold

• Goods and services debits (imports) fell $340m (0.7%) driven by Fuels and lubricants

Commodities 

"China optimism continued to boost sentiment across commodity markets, aided by a weaker USD. This helped shrug off concerns of broader weaker economic growth amid central bank tightening,” said ANZ senior commodity analyst, Daniel Hynes. 

• Iron ore futures +1.9% to US$107.8

• Brent crude +0.5% to US$77.8

Latest news

Post market brief

We talked about the pullback being just as important as the rally and so far, it's been pretty ugly. The ASX 200 has closed around session lows three days in a row.

XJO chart (Source: TradingView)

The market has U-turned from "Yay a Powell pivot" to "oh dear a recession is coming" rather quick. This is proving a little troublesome given the ASX 200 was trading at a rather extended level. We're searching for a floor, but downside momentum continues to build.

A quick note on:

Lithium: Lithium stocks are struggling to find support and Goldman Sachs is only adding further insult to injury. The note today said spot prices could begin to fall in the second half of 2023 on the back of decelerating EV demand. We're seeing a big name like Allkem pullback to this low $13.00 area, which has proven to be a key area of support in the past. Can it muster up a bounce or does it break down from here?

Allkem chart (Source: TradingView)

Oil: Woodside is pulling back sharply as oil prices deteriorate. You can see the trend get hit pretty hard from Thursday's selloff, with the 20-day firmly pointing downwards and the 50-day begin to turn.

Woodside chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• Chalice Mining (CHN) +13.1%: Hit significant PGE-dominant sulphide mineralisation in initial drilling at the greenfield Hooley Prospect, 5km north of its Julimar Project in WA   

• Transurban (TCL) +1.2%:  Successfully raised $425m of debt via a 10-year institutional term loan facility 

• HomeCo Daily Needs REIT (HDN) +0.8%: Plans to acquire Southland Boulevarde, a ‘rare triple supermarket’ in metropolitan Perth for $92.5m and reaffirmed its FY23 guidance  

• Air New Zealand (AIZ) +0.4%: Upgraded its 1H23 guidance to $295-325m from $220-275m and assumes to fly approximately 75% of pre-covid capacity

• Downer EDI (DOW) -20.4%: Reported ‘accounting irregularities’ that overstated recent earnings by up to $40m. The company also downgraded its FY23 guidance due to difficult weather conditions and elevated costs 

Mid-to-small caps

• Fonterra Shareholders Fund (FSF) +2.75%: Upgraded its earnings per share guidance to 50-70 cents from 45-60 cents 

• Neometals (NMT) -3.1%: Issued SMS Group a 50% equity interest in the company’s battery recycling IP holding company to accelerate its commercial activities

• Latin Resources (LRS) -10.4%:  Posted the Maiden Mineral Resource Estimate for its Colina Prospect. The project has a deposit of 1.3.3m tonnes at 1.2% lithium  

Capital raisings

• Renascor Resources (RNU) -3.1%: Successfully raised $70m at 27.5 cents per share, a 14.1% discount to its pre-raise close  

Broker updates 

Scans