Evening Wrap: ASX 200 rises on RBA hold and BOJ hike as iron ore rally boosts BHP, RIO & FMG

Iron ore miners helped the index to a modest but welcome gain. A rally in the iron price back above US$100/t was the catalyst. Elsewhere, gold and energy stocks prospered as the prices of their respective commodities also rose.

In economics news, the Bank of Japan made a historic shift in policy, ending 17 years of negative rates and abolishing yield curve control. Locally, it was far more mundane at the RBA. No change as expected, but Governor Bullock notes the next move in rates could be either way.

Let’s dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 27.4 points higher at 7,703.2, 0.47% from its session low and just 0.06% from its high/low. It was the second day of near-total-balance between advancers and decliners in the broader-based S&P/ASX 300 (XKO) at 138 a piece. Clearly, despite two modest days of gains, indecision reigns.

The Resources (XJR) (+2.2%) sector was the best performing sector today, likely in response to rising prices of iron ore, aluminium, copper, and tin. We've been all over the developments in these markets in Evening Wrap, and there's a follow up on the bouncing iron ore price in ChartWatch below. BHP Group (ASX: BHP) (+2.8%), Rio Tinto (ASX: RIO) (+2.5%), and Fortescue (ASX: FMG) (+3.6%) each enjoyed solid daily gains.

It's been a great start to the week for ASX resources stocks

Also doing well today were the Energy (XEJ) (+2.0%) sector and the Gold (XGD) (+1.7%) sub-index. The price of gold has only edged higher, but gold stocks were likely helped by the broader resources rally. On the other hand, WTI crude oil did log a solid gain on Monday – and that's three out of four now.

Energy stocks are benefiting from a rally in the WTI crude oil price back above US$82/bbl

ChartWatch

Iron Ore Futures SGX

The iron ore price appears to be bouncing from a key area of historical demand

Last time we checked up on the Iron Ore chart, it was rapidly approaching the $94/t-$99.20/t historical support zone.

The thing about historical support zones is there's no guarantee they'll do their job. Only a brave trader trusts a point of supply blindly, and without waiting for some confirmation that excess demand is actually manifesting where its supposed to be.

White candles and or downward pointing shadows are the template manifestations of excess demand. When we see candles with these characteristics at historical points of demand, they indicate these points are indeed behaving as support.

It's the case here in iron ore, where Monday's big white candle with its downward pointing shadow into the demand zone clearly signals excess demand has returned. Today's candle (still live) appears to be confirming a short term low is in place.

I note the short term trend remains entrenched to the downside, and the long term trends is neutral and is likely transitioning to down. Price action is still lower peaks and lower troughs.

This means traders should be wary of a continued sell the rally mentality in the market. Such behaviour is likely to exhibit itself at historical points of demand or supply, for example in the range between $109.25/t-$111.95/t, as well as the dynamic resistance of the short term downtrend ribbon.

Black candles and upward pointing shadows at either of these key levels would signal a return to supply side control.

BHP Group (ASX: BHP)

A case of light green zone marks the spot for BHP?

Given the above, lets take a look at the big Australian. Not surprisingly, BHP's technicals largely ape those of iron ore. Well-established short term downtrend within a long term trend which is rapidly transitioning to down.

Price action is still lower peaks and lower troughs, signaling a sell the rally mentality is firmly in place, and up until today, candles have been predominantly demonstrative of supply-side control.

But, today's candle is anything but. The big white body and close near the high smacks of a combination of bottom of the range buying and short covering. It also implies there remains a large degree of unquenched excess demand in the system – which could flow through to tomorrow's candle.

$41.93 is now demand, but really it's the 1 June 2023 low of $41.66 which holds sway in terms of historical support. Historical supply is $45.02, but before we get there, BHP will have to contend with the dynamic supply usually afforded by the short term downtrend ribbon.

Economy

Today

• JPN Bank of Japan Policy Rate decision

  • Policy Rate +0.1% to 0%-0.1% vs forecast of no change at -0.10%

  • First time since 2007 rates aren't negative

  • Also ends yield curve control policy on 10-year Japanese Government Bonds

• AUS RBA Rate Statement

  • No change to cash rate at 4.35% vs forecast of no change

  • Inflation continues to moderate but remains high

  • Outlook remains highly uncertain, household consumption growth remains particularly weak, meanwhile, growth in unit labour costs remains very high

  • Inflation to return to the target range of 2–3 per cent in 2025

  • But! The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out

  • RBA Governor Michelle Bullock press conference comments:

    • "We're not confident enough to say we can rule out further interest rate changes [increases], but we do feel we're on the path to get ourselves back to inflation within target within our forecast period"

    • We'd have to be "much more confident" that inflation was coming back into the target band before considering rate cuts, but at the moment "we're not seeing that"

Later this week

Wednesday

• CHN 12:15 1-year and 5-year loan prime rate announcement (forecast no change at 3.45% and 3.95% respectively)

Thursday

• 05:00 USA Federal Funds Rate decision, FOMC economic projections, FOMC Statement (forecast no change at 5.5%)

• 05:30 USA FOMC Press Conference

• 11:00 AUS Employment Change (+40.2k for 4.0% rate forecast vs +500 for +4.1% previous)

• 19:15-20:00 EUR Flash Manufacturing PMIs, France, Germany, Europe

Friday

• 00:45 USA Flash Manufacturing PMI (51.8 forecast vs 52.2 previous) & Flash Services PMI (52.0 forecast vs 52.3 previous)

Saturday

• 00:00 USA Federal Reserve Chairman Jerome Powell speaks

Latest News

Interesting Movers

Trading higher

• +16.1% 29METALS (29M) - No news, copper price continues to rally and copper stocks with it, short term trend has turned up

• +14.4% Baby Bunting Group (BBN) - Change of Director's Interest Notice - Donna Player (on market purchase ~$18.3k), upgraded to overweight from equal-weight at Morgan Stanley, price target increased to $2.20 from $1.65

• +13.6% Peninsula Energy (PEN) - Company Presentation - March 2024

• +13.0% Terracom (TER) - Change of Director's Interest Notice (M Lochtenberg) (on market purchase ~$348k)

• +11.4% Pacific Smiles Group (PSQ) - Revised Non-Binding Indicative Proposal from Genesis Capital, rise is consistent with prevailing short term uptrend, long term trend transitioning to up

• +9.4% Superloop (SLC) - Superloops response to ABBs legal action

• +8.5% Resimac Group (RMC) - No news 🤔

• +8.1% Nickel Industries (NIC) - Update on March Quarter Mining and RKEF Operations

• +8.0% Praemium (PPS) - No news, possibly daily buyback at play…

• +7.8% K&S Corporation (KSC) - No news, rise is consistent with prevailing short and long term uptrends

• +7.3% Macmahon Holdings (MAH) - No news, rise is consistent with prevailing short and long term uptrends

• +7.0% Bellevue Gold (BGL) - High-grade shoots identified at Deacon and UBS Mid & Emerging Resources Presentation, rise is consistent with prevailing short and long term uptrends

• +6.9% Southern Cross Electrical Engineering (SXE) - Investor Roadshow Presentation, rise is consistent with prevailing short and long term uptrends

Trading lower

• -9.5% Appen (APX) - Deflating after 14 Mar Withdrawal of Innodata's non-binding indicative proposal, fall is consistent with prevailing long term downtrend

• -9.3% Latin Resources (LRS) - Maverick Minerals Spinout - Withdrawal of Priority Offer, closed back below long term downtrend ribbon

• -6.8% Polynovo (PNV) - No news, second big black candle with low close in 4 trading sessions

• -6.8% Novonix (NVX) - No news, heat coming out of recent short covering / batter metals & tech rally

• -6.7% Alpha HPA (A4N) - No news, heat coming out of recent short covering / batter metals & tech rally

• -6.1% Winsome Resources (WR1) - No news, heat coming out of recent short covering / batter metals & tech rally

• -4.7% Avita Medical Inc (AVH) - No news, closed below short term trend ribbon

• -4.3% Omni Bridgeway (OBL) - No news, fall is consistent with prevailing short and long term downtrends

• -4.2% Talga Group (TLG) - No news, heat coming out of recent short covering / batter metals & tech rally, fall is consistent with prevailing long term downtrend

• -4.1% Macquarie Technology Group (MAQ) - No news 🤔

• -4.1% Vulcan Energy Resources (VUL) - No news, heat coming out of recent short covering / batter metals & tech rally

• -4.1% Kogan.Com (KGN) - No news 🤔

Broker Notes

• Life360 (360) retained at overweight at Morgan Stanley; Price Target: $14.40

• Abacus Group (ABG) retained at buy at Citi; Price Target: $1.35

• Austin Engineering (ANG) retained at buy at Shaw and Partners; Price Target: $0.60 from $0.50

• Abacus Storage King (ASK) retained at buy at Citi; Price Target: $1.40

• Baby Bunting Group (BBN) upgraded to overweight from equal-weight at Morgan Stanley; Price Target: $2.20 from $1.65

• Black Rock Mining (BKT) retained at outperform at Macquarie; Price Target: $0.25

• Breville Group (BRG) retained at neutral at Macquarie; Price Target: $26.30 from $25.50

• BWP Trust (BWP) retained at sell at Citi; Price Target: $3.40

• Chrysos Corporation (C79) retained at buy at Bell Potter; Price Target: $8.30

• Charter Hall Group (CHC) retained at buy at Citi; Price Target: $13.40

• Charter Hall Long Wale REIT (CLW) retained at neutral at Citi; Price Target: $3.90

• Charter Hall Retail REIT (CQR) retained at buy at Citi; Price Target: $4.00

• Cettire (CTT) retained at buy at Bell Potter; Price Target: $4.80

• Dexus (DXS) retained at neutral at Citi; Price Target: $8.20

• Goodman Group (GMG) retained at buy at Citi; Price Target: $32.50

• Growthpoint Properties Australia (GOZ) retained at buy at Citi; Price Target: $2.60

• GPT Group (GPT) retained at buy at Citi; Price Target: $4.90

• GQG Partners (GQG) retained at buy at Goldman Sachs; Price Target: $2.40

• Insurance Australia Group (IAG) retained at at Goldman Sachs; Price Target: $6.00

• Iluka Resources (ILU) upgraded to neutral from sell at UBS; Price Target: $7.50 from $6.70

• Ingenia Communities Group (INA) retained at buy at Citi; Price Target: $5.30

• Lifestyle Communities (LIC)

  • Retained at buy at Citi; Price Target: $20.00

  • Initiated buy at Moelis Australia; Price Target: $20.00

• Lendlease Group (LLC) retained at neutral at Citi; Price Target: $6.90

• Lynas Rare Earths (LYC) retained at buy at UBS; Price Target: $6.90 from $8.50

• Microba Life Sciences (MAP) retained at buy at Bell Potter; Price Target: $0.35

• Mirvac Group (MGR) retained at neutral at Citi; Price Target: $2.30

• Matador Mining (MZZ) retained at buy at Shaw and Partners; Price Target: $0.19

• Nickel Industries (NIC) retained at outperform at Macquarie; Price Target: $1.18 from $1.20

• National Storage REIT (NSR) retained at buy at Citi; Price Target: $2.60

• QBE Insurance Group (QBE) retained at overweight at Morgan Stanley; Price Target: $19.80

• Qualitas Real Estate Income Fund (QRI) retained at buy at Citi; Price Target: $1.60

• Region Group (RGN) retained at buy at Citi; Price Target: $2.60

• Scentre Group (SCG) retained at neutral at Citi; Price Target: $3.10

• Stockland (SGP) retained at buy at Citi; Price Target: $5.20

• Superloop (SLC) retained at overweight at Morgan Stanley; Price Target: $1.65 from $1.00

• Suncorp Group (SUN) retained at neutral at Goldman Sachs; Price Target: $6.00

• Vicinity Centres (VCX) retained at neutral at Citi; Price Target: $2.10

Scans