Evening Wrap: ASX 200 rally fizzles post RBA rate hike, Pilbara Minerals hits all-time high

The S&P/ASX 200 closed 26 points lower, down -0.38%.

The Reserve Bank hikes rates by 50 bps to 2.35%, Newcastle coal futures hit an all-time high, lithium stocks rally and a breakdown of OPEC's production cut.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 4 out of 11 sectors advanced

• Technology led thanks to ~1% gains from names like Wisetech, Xero and Altium

• Energy also outperformed following OPEC's production cut

• Utilities fell an outsized -2.2% following a -3.3% decline from heavyweight Origin Energy

• 55% of the top 200 companies declined

Stocks

• Karoon Energy (ASX: KAR) +5.2% said a second well has been brought back online and expected to produce approximately 3,700 barrels of oil per day

• Mydeal.com (ASX: MYD) +0.5% shareholders voted in favour the $1.05 per share Woolworths takeover

• Develop Global (ASX: DVP) +0% updated its Mineral Resource Estimate for its Sulphur Springs Project in WA. It now hosts 1.3m tonnes of zinc-equivalent material

• Hastings Technology (ASX: HAS) +0% launched a $100m capital raising to fund the development of its Yangibana Rare Earths Project. New shares will be issued at $4.40 or an 18.8% discount to its last closing price of $5.42 

Economy

• RBA raised interest rates by 50 bps to 2.35%, in-line with consensus expectations

  • “The Bank's central forecast is for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.”

  • “The further increase in interest rates today will help bring inflation back to target and create a more sustainable balance of demand and supply.”

  • “The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.”

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange rose 2.2%

• Newcastle coal futures rose 5.2% to a record US$457.80 a tonne

• Copper prices up 1.6% to US$3.47/lb

  • Down -3.8% in the past week

• Lithium carbonate prices in China rose 0.4% to 494,500 yuan a tonne

  • Close to March all-time highs of 497,000

Scans

Latest news

Post market charts

S&P/ASX 200: Quite a whipsaw day as far as the index is concerned. The ASX 200 fell from session highs of 0.88%. Selling occurred mostly in the final hour of trade. Fading from session highs in an already weak market is not a good look. The market needs to defend these recent lows.

XJO chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Energy: Continues to bounce. Oil is trying to stabilise after the recent selloff, now even further from previous highs.

XEJ weekly chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Info Tech: Stuck in this downward channel.

XIJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Financials: Eyes on this 6,130 area.

XFJ chart (Source: TradingView, Annotations by Market Index)

Stocks and sectors

The ASX 200 might’ve rolled over towards close but the sectors that have been showing strength in recent weeks held up relatively well.

Uranium names powered ahead led by Paladin Energy (ASX: PDN) and Boss Energy (ASX: BOE). Most other small-to-mid cap explorers also rallied between 4-7%. 

Paladin Energy chart (Source: TradingView, Annotations by Market Index)

Lithium gets mentioned here in almost every wrap. We’ve observed its V-shaped rebound, small-to-mid caps underperforming large caps, a recent pullback and now, another rally.

Pilbara Minerals (ASX: PLS) hit a new all-time high, up 33% in the last month. 

Allkem (ASX: AKE) also showed strength but rallied into this key resistance area.

Allkem chart (Source: TradingView, Annotations by Market Index)

Small-to-mid caps experienced a sharper pullback relative to their large cap peers. We noted names like Liontown (ASX: LTR), Essential Metals (ASX: ESS) and Lithium Power (ASX: LPI) on Monday as ones pulling into key areas like the 20-day. More broadly speaking, it feels like the less volatile pullback names are the ones that rallied harder on Tuesday.

Lithium Power International chart (Source: TradingView, Annotations by Market Index)

Food for thought

HFI Research’s take on OPEC’s production cut: “OPEC+ cut is symbolic. The 100,000 barrels a day quota decrease doesn’t make any difference, but one thing is very evident: this won’t be like 2018. And for those that remember 2018, Saudi dramatically increased exports in November to placate Trump. Not the same, not the same. For energy investors, while this is in some way a “put/floor” on oil, we must still be mindful of macro/demand. As monthly demand data over the next few months surprise to the upside, we think investors will start underwriting energy stocks at a higher oil price assumption.” 

AMP's Shane Oliver on rate hikes: "Given usual lags from rate hikes to their economic impact there is a very strong case for the RBA to now slow the pace of hikes to give time to assess their impact. Our 2.6% peak for the cash rate now looks too low, but we expect slower hikes ahead, a peak now at 2.85% and easing late next year." CoreLogic on mortgages: "For a household with a $750,000 mortgage, a cash rate of 2.5% implies a variable mortgage rate for a new buyer of 4.81%, adding around $1,011 per month to mortgage repayments relative to the record low rate setting prior to May 5.  A cash rate of 3.5% would add approximately $1,477 per month to the cost of a $750,000 mortgage."