Evening Wrap: ASX 200 posts biggest drop this year led by banks, miners and energy stocks

The S&P/ASX 200 closed 166 points lower, down -2.28%.

The local sharemarket posts its first 2% fall for 2023, the Bank of Japan kept interest rates unchanged, lithium and bank stocks sell off sharply and a preview of tonight's high stakes jobs report.

Let's dive in.

ASX 200 Session Chart

A full day of selling (Source: TradingView)

Markets

What an ugly market. The ASX 200 has nosedived to two month lows, the US market is rolling over and we've still got to survive another two major catalysts (US jobs and inflation).

• Resources sold off aggressively, with commodity prices generally weaker (except iron ore) and oil prices down 6.7% in the last four sessions

• Financials tumbled, potentially compounded by the Silvergate Capital's collapse

  • Interesting line from Bloomberg: "Silvergate's troubles are as much if not more about traditional bank risks – lack of diversification, maturity mismatches – as it is about its exposure to crypto."

• Defensive sectors including Utilities, Telcos and Staples outperformed

Economy

The Bank of Japan kept interest rates unchanged at -0.1% and kept the band around its 10-year yield target at +/-0.5%.

Latest news

Market Insights

Talking Technicals: It looks bullish if you invert it

This is an inverted ASX 200 daily chart and you can't tell me it doesn't look like a pretty clean breakout.

ASX 200 inverted (Source: TradingView)

The four green days from earlier this week reminds me of how the market was trading last year: A few good days followed by sharp and volatile downward moves. We're now back to an all too familiar place where:

• Is the market oversold? Increasingly yes.

• Is the market due to bounce? As it gets more oversold, yes.

• What about momentum? Down.

In Thursday's Evening Wrap, I noted how lithium stocks like Pilbara Minerals are trying to bottom around the 200-day moving average. Today, Pilbara Minerals got slammed -7.0%. It goes to show a) I might be Jim Kramer and b) how volatile and difficult the markets are right now. Stay safe.

A high-stakes US jobs report

Brace yourself for another market moving catalyst: US nonfarm and unemployment. Here's what the experts are thinking:

• Consensus: non-farm payrolls up 205,000 and unemployment unchanged at 3.4%

• Morgan Stanley: "We expect nonfarm payrolls increased by 190,000 in February with an uptick in participation ... which should keep the unemployment rate at 3.4% ... We expect average hourly earnings to increase by 0.3% month-on-month, raising the year-over-year rate to 4.7%."

• Goldman Sachs: "We estimate non-farm payrolls rose by 250,000 in February, above consensus of 225,000 ... we believe because some firms front-load spring hiring in anticipation of spring labour shortages and all four Big Data employment indicators we track were indeed strong."

Interesting news and movers

Trading higher

• +8.8% Volpara Health (VHT) – FDA reporting rule released

• +6.4% Silex Systems (SLX)

• +2.1% Cash Converters (CCV)

Trading lower

• -24.6% Atlantic Lithium (A11) – Short report

• -7.2% IGO (IGO)

• Lithium sector move: Allkem (-8.6%), Sayona Mining (-8.0%), Liontown Resources (-8.0%) and Pilbara Minerals (-7.0%)

• Banking sector move: Commonwealth Bank (-3.2%), NAB (-3.2%), ANZ (-2.8%) and Westpac Bank (-2.6%)

Broker updates

Some more standalone Macquarie notes:

29Metals (29M): Underperform with $1.30 target price

• “The troubles continue for 29M with one of their two mines suspended. We view that downside risks have increased with the possibility of a guidance downgrade on the horizon due to Capricorn issues.”

• CY23 copper production forecast downgraded to 33,800 tonnes (vs. company guidance of 36-43,000 tonnes)

Steadfast Group (SDF): Outperform with $6.50 target price

• "The premium rate cycle remains exceptionally strong, supporting our Outperform recommendation.”

Xero (XRO): Neutral with $90.00 target price 

• “Positive announcement from XRO and reflects the first step in a leaner, more efficient business model under the new CEO.”

• “The key unknown remains the pace of subscriber growth under the new cost structure.”

Scans