Evening Wrap: ASX 200 slumps as cash scrambles for sidelines amidst rising rate expectations and massive upcoming risk event

The S&P/ASX 200 closed 138.7 points lower, down 1.66%.

It was a one-two-three punch knockout for the Australian share market today.

Click/scroll through to find out why Aussie stocks suffered their worst one-day decline in six weeks, plus for the usual reporting of all the major sector and stock-specific moves, the broker responses to them, and all of the key upcoming economic data.

Also, I have detailed technical analysis on Uranium and Copper in today's ChartWatch.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 138.7 points lower at 8,205.7, 1.69% from its session high and just 0.05% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by a dismal 60 to 226.

I only need three charts to explain what happened today...and it probably won't be the explanation you'll get in other flimsy wraps that will no doubt talk of profit taking or "overvaluation"!

1. Russell 2000 Index (RUT)

Russell 2000 Index (RUT) chart

We discussed on Friday just how important a leading indicator this index is for the US economy, and by extension, for global equities including our own market. While the NASDAQ Composite (up Monday) and the S&P 500 (mostly flat Monday) gave many the wrong signal about US stocks leading into today's trade on the ASX, this one told you something far more sinister was up...

2. Japan 2-year Government Bond Yield

2-yr JGB yield chart

We often talk in this Wrap just how important bond yields are for all other markets. It starts with the bond market. It always starts with the bond market.

Bond markets set the price of money, and the price of money sets the price of all other assets. When risk free bond yields, like those for JGB's, are rising, it puts pressure on valuations of risky assets like stocks.

Yields on JGB's are rising ahead of the critical and major global risk event of the next Bank of Japan (BOJ) meeting scheduled for 30 - 31 October. This suggests traders are positioning for another potential BOJ rate hike. Don't forget that the last BOJ hike triggered a mini-correction back in August.

3. Australia 2-year Government Bond Yield

2-yr Aus Govt Bond yield chart

Rising JGB yields, rising US yields since their strong September jobs report, but mainly due to our own very strong September employment data released last week, are forcing the yields of Aussie bonds higher. The market has gone from expecting 4 x 0.25% interest rate cuts from the RBA within the next 12 months to just 3 within the next 18 months.

Stocks don't like rising yields, they didn't like it today.

As you can see a few things conspired today to knock the Aussie stock market down. I'm not a prognosticator, so I won't predict whether these factors will continue to conspire to do the same over the next few sessions – but it would not surprise me to see increased volatility ahead of the BOJ meeting next week.

Best vs worst ASX sectors today

As for our usual chat about best / worst sectors in this segment of the Wrap, not surprisingly, interest rate sensitives were hit the hardest.

It might appear unusual for Health Care (XHJ) (-2.4%), to appear at the top of the worst performers list, unless you consider that it too has quite a few influential high-PE / long duration that tend to get hit hard on days like this (Pro Medicus (PME) (-4.0%) is a prime example!).

Gold (XGD) (-0.12%) was the least-worst as the gold and silver price continued to climb on Monday and into Asian trade today.

ChartWatch

Uranium Futures (Front month, back-adjusted) COMEX

Squeezed by the short and long term uptrends

The last time we covered uranium was in ChartWatch in the Evening Wrap on 20 September.

It’s been over a month since we last covered uranium, so perhaps we’re overdue for an update here – but I note not a great deal has changed.

The uranium price has traded in a narrow range between 78.90 and 83.50 and continues to trade below the long term trend ribbon.

It has however arrested its short term trend, as per the rising short term uptrend ribbon, although more recently the price action has resumed falling peaks and falling troughs.

To summarise the above: It’s stuck in the middle between long term apathy at best, and a potentially stalling modest short term uptrend.

The short term uptrend ribbon should in theory act as a zone of excess demand. I’d say there’s a very good chance the long term trend ribbon will continue to act as a strong zone of excess supply.

Until the uranium price can close decisively on the other side of one of the two, I expect the recent listless trade to continue.

To put some specific price points to things: A close above 85.45 would indicate the demand-side has grappled control, while a close below 78.90 would indicate it’s the supply-side that has the upper hand.

High Grade Copper Futures (Front month, back-adjusted) COMEX

Is copper actually going to be the next big thing?

The last time we covered high grade copper was in ChartWatch in the Evening Wrap on 8 October.

In that update, we had noted the clear supply side candles that had manifested the excess supply at the key 4.762-4.768 supply zone, and how the price was likely to continue to probe points of demand at the short term uptrend ribbon and between 4.274-4.322.

Instead of an emphatic demand-side candle (i.e., white bodied and or downward pointing shadow) in the short term uptrend ribbon, we witnessed a credible supply-side opposite, and a transition to falling peaks and falling troughs ensued.

Yesterday’s clear supply-side candle (i.e., black bodied and upward pointing shadow) is a good indication of how the market is placed here – the supply appears to be in control of the copper price in the short term at the very least.

The only saving grace for copper now is the dynamic demand presently being exerted around the long term uptrend ribbon. It’s holding for now, but a close below 4.27—4.291 would likely result in deeper declines towards 3.989-4.042.

Should that occur, then one must seriously question the viability of the “copper is the next big thing” thesis so many Aussie investors are counting on.

I’d go so far as to say it’s make or break here at the long term uptrend ribbon. We need to see the demand-side come in and act quickly to secure the long term uptrend. This can only occur with demand-side candles and a return to rising peaks and rising troughs. I suggest long white candles and or long downward pointing shadows are a minimum requirement – and preferably very soon!

Economy

Today

• There weren't any major data releases in our time zone today

Later this week

Wednesday

• 00:25 UK BOE Governor Andrew Bailey speech

• 06:15 EUR ECB President Christine Lagarde Speaks

Thursday

• 09:00 AUS Flash PMIs October

  • Flash Manufacturing PMI: was 46.7 in September

  • Flash Services PMI: was 50.5 in September

• 19:00 EUR Various EU countries and European Flash PMIs October

  • EUR Flash Manufacturing PMI: 45.1 forecast vs 45 in September

  • EUR Flash Services PMI: 51.5 forecast vs 51.4 in September

Friday

• 00:45 USA Flash PMIs October

  • Flash Manufacturing PMI: 47.5 forecast vs 47.3 in September

  • Flash Services PMI: 55.0 forecast vs 55.2 in September

• 23:30 USA Core Durable Goods Orders September (-0.1% m/m forecast vs +0.5% m/m in August)

Latest News

Interesting Movers

Trading higher

• +6.7% Praemium (PPS) - Q1 FY2025 Update and Q1 FY2025 Update Presentation, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up (has been a regular in ChartWatch Daily Scans Uptrends lists last few weeks) 🔎📈

• +5.5% Ioneer (INR) - Continued positive response to yesterday's September 2024 - Quarterly Activities Report and September 2024 - Quarterly Cash Flow Report, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up (has been a regular in ChartWatch Daily Scans Uptrends lists last few weeks) 🔎📈

• +4.3% Wildcat Resources (WC8) - No news, modest bounce in lithium futures in China today, rise is consistent with prevailing short term uptrend

• +4.0% Capitol Health (CAJ) - No news, rise is consistent with prevailing short and long term uptrend, a ChartWatch Daily Scans Uptrends list regular 🔎📈

• +3.4% Stanmore Resources (SMR) - September 2024 Quarterly Activities Report

• +3.2% Clarity Pharmaceuticals (CU6) - No news

• +3.0% Corporate Travel Management (CTD) - No news

• +3.0% Yancoal Australia (YAL) - No news, rise is consistent with prevailing short and long term uptrend, a regular in ChartWatch Daily Scans Uptrends lists last few weeks 🔎📈

Trading lower

• -12.2% Lake Resources (LKE) - Appendix 3Y- Amended, but unlikely to explain today's decline…consistent with recent share price volatility!

• -11.0% Opthea (OPT) - No news, long black candle…needs to bounce quickly out of the short term uptrend ribbon…🤔

• -8.4% Polynovo (PNV) - No news, fall is consistent with prevailing short term downtrend and falling peaks and falling troughs, closed below the long term trend ribbon ⚠️

• -7.1% Iperionx (IPX) - IperionX Completes A$100 Million Placement

• -6.7% Viva Energy Group (VEA) - 3Q2024 Operating Update and C&M FY2024 Guidance, fall is consistent with prevailing short and long term downtrend, a ChartWatch Daily Scans downtrends list regular 🔎📉

• -6.2% Metcash (MTS) - No news, fall is consistent with prevailing short and long term downtrend, a ChartWatch Daily Scans downtrends list regular 🔎📉

• -6.1% Audinate Group (AD8) - Q1 FY2025 Update and AGM Chair and CEO Presentations, fall is consistent with prevailing short and long term downtrend, a ChartWatch Daily Scans downtrends list regular 🔎📉

• -4.2% Mineral Resources (MIN) - Continued negative fallout from yesterday's Statement in response to recent media reports, fall is consistent with prevailing short and long term downtrend, a ChartWatch Daily Scans downtrends list regular 🔎📉

• -4.0% Pantoro (PNR) - Change in substantial holding (decrease from L1 Capital)

Broker Notes

• The A2 Milk Company (A2M)

  • Retained at neutral at Macquarie; Price Target: $5.90

• Aristocrat Leisure (ALL)

  • Retained at outperform at Macquarie; Price Target: $55.00

• Amotiv (AOV)

  • Retained at buy at Canaccord Genuity; Price Target: $14.40

  • Retained at hold at CLSA; Price Target: $10.81

  • Retained at overweight at JP Morgan; Price Target: $13.00

  • Retained at overweight at Wilsons; Price Target: $12.71 from $12.69

• Aurizon (AZJ)

  • Retained at neutral at Macquarie; Price Target: $3.60

• Baby Bunting Group (BBN)

  • Retained at hold at Morgans; Price Target: $1.80 from $1.70

• Bellevue Gold (BGL)

  • Retained at buy at Canaccord Genuity; Price Target: $2.25

  • Retained at outperform at Macquarie; Price Target: $1.90

  • Downgraded to lighten from hold at Ord Minnett; Price Target: $1.35

  • Retained at outperform at RBC Capital Markets; Price Target: $1.90

  • Retained at buy at UBS; Price Target: $1.65

• BHP Group (BHP)

  • Retained at overweight at Morgan Stanley; Price Target: $46.85

  • Retained at accumulate at Ord Minnett; Price Target: $45.00

• Beacon Lighting Group (BLX)

  • Retained at buy at Citi; Price Target: $3.12

• Beach Energy (BPT)

  • Retained at buy at Bell Potter; Price Target: $1.50 from $1.40

• Breville Group (BRG)

  • Retained at outperform at Macquarie; Price Target: $35.10

• Charter Hall Group (CHC)

  • Retained at outperform at Macquarie; Price Target: $15.43

• Collins Foods (CKF)

  • Retained at neutral at Macquarie; Price Target: $8.30

• Coles Group (COL)

  • Retained at outperform at Macquarie; Price Target: $20.20

• Domino's Pizza Enterprises (DMP)

  • Retained at neutral at Macquarie; Price Target: $35.00

• Endeavour Group (EDV)

  • Retained at neutral at Macquarie; Price Target: $5.40

• Generation Development Group (GDG)

  • Retained at hold at Morgans; Price Target: $3.51

  • Retained at buy at Ord Minnett; Price Target: $3.90 from $3.40

• Iluka Resources (ILU)

  • Retained at buy at Citi; Price Target: $7.30

• Jumbo Interactive (JIN)

  • Upgraded to buy from neutral at Citi; Price Target: $14.70 from $14.25

• Metcash (MTS)

  • Downgraded to sell from neutral at Goldman Sachs; Price Target: $3.10 from $3.80

• Nick Scali (NCK)

  • Retained at buy at Citi; Price Target: $15.93 from $16.53

  • Retained at outperform at CLSA; Price Target: $15.50 from $18.00

  • Retained at buy at Jarden; Price Target: $15.88 from $16.52

  • Retained at outperform at Macquarie; Price Target: $15.60 from $16.25

  • Downgraded to accumulate from buy at Ord Minnett; Price Target: $15.00 from $16.50

  • Retained at overweight at Wilsons; Price Target: $17.30 from $17.40

• Nufarm (NUF)

  • Retained at neutral at Macquarie; Price Target: $4.00

• Nextdc (NXT)

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

• Orora (ORA)

  • Retained at neutral at Citi; Price Target: $2.80 from $2.55

  • Retained at outperform at Macquarie; Price Target: $2.84

• Propel Funeral Partners (PFP)

  • Retained at outperform at Macquarie; Price Target: $6.98 from $6.88

• Pantoro (PNR)

  • Retained at buy at Ord Minnett; Price Target: $0.15 from $0.12

• Polynovo (PNV)

  • Initiated at neutral at JP Morgan; Price Target: $2.35

• Perseus Mining (PRU)

  • Retained at outperform at Macquarie; Price Target: $3.40

• QBE Insurance Group (QBE)

  • Retained at neutral at Macquarie; Price Target: $17.10

• REA Group (REA)

  • Upgraded to overweight from neutral at JP Morgan; Price Target: $240.00 from $190.00

  • Retained at overweight at Morgan Stanley; Price Target: $250.00

  • Retained at buy at UBS; Price Target: $263.00 from $232.20

• Ramsay Health Care (RHC)

  • Retained at neutral at Macquarie; Price Target: $45.75

• Rio Tinto (RIO)

  • Retained at neutral at Macquarie; Price Target: $119.00

• Regis Resources (RRL)

  • Retained at outperform at Macquarie; Price Target: $2.90

• South32 (S32)

  • Retained at buy at Citi; Price Target: $3.90

  • Retained at buy at Goldman Sachs; Price Target: $3.90 from $3.80

  • Retained at outperform at Macquarie; Price Target: $4.05 from $4.15

  • Retained at equal-weight at Morgan Stanley; Price Target: $3.20

  • Retained at buy at Ord Minnett; Price Target: $4.25

  • Retained at outperform at RBC Capital Markets; Price Target: $3.90

  • Retained at buy at UBS; Price Target: $4.05

• Scentre Group (SCG)

  • Retained at outperform at Macquarie; Price Target: $3.60

• Steadfast Group (SDF)

  • Retained at outperform at Macquarie; Price Target: $6.80

• Sims (SGO)

  • Retained at neutral at UBS; Price Target: $5.32

• Stockland (SGP)

  • Retained at buy at Citi; Price Target: $6.00 from $5.30

  • Retained at reduce at CLSA; Price Target: $5.72 from $5.04

  • Retained at reduce at JP Morgan; Price Target: $4.90

  • Retained at overweight at Morgan Stanley; Price Target: $6.35

• The Star Entertainment Group (SGR)

  • Retained at neutral at Macquarie; Price Target: $0.24

• Select Harvests (SHV)

  • Retained at buy at Bell Potter; Price Target: $4.60 from $4.95

• Serko (SKO)

  • Retained at buy at Citi; Price Target: $3.40 from $4.00

• Telstra Group (TLS)

  • Retained at outperform at Macquarie; Price Target: $4.30

• Ventia Services Group (VNT)

  • Downgraded to hold from outperform at CLSA; Price Target: $4.45

• Westpac Banking Corporation (WBC)

  • Retained at equal-weight at Morgan Stanley; Price Target: $29.70

• Webjet (WJL)

  • Initiated at hold at Jefferies; Price Target: $0.95

Scans