Evening Wrap: ASX 200 snaps 8 day winning streak, defensive stocks shine, lithium stocks tumble

 The S&P/ASX 200 closed 18 points lower, down -0.25%. 

An eight day winning streak comes to an end, defensive sectors like Healthcare, Utilities and Staples manage to close green, Australia's trade surplus widens as imports tumble, China's services PMI hits a 28 month high and broker takes on the RBA, copper and automotives.

Let's dive in.

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ASX 200 Session Chart

ASX 200 eases and closes around session lows (Source: Market Index)

Markets

A little bit of house keeping before we jump into things. The Morning and Evening Wraps will be taking a break over Easter (Friday and next Monday). Today's Wrap will also not include the usual Latest News and Market Insights segments. Hope you all have a fabulous Easter break. US markets are closed on Friday but open next Monday so hopefully we don't return to an ugly surprise.

The ASX 200 had its first red day in eight sessions, marking an end to a rather powerful 4.1% post banking crisis rally. In previous wraps, we noted how the market's started to fell fatigued after such a bounce. The question is, as we pull back - What kind of pullback do we get? Will the market hold onto the recent gains? Or was this just another bear market bounce?

• Defensive sectors were the only green pockets of the market, in-line with the defensive shift on Wall Street and Dow outperformance

• Technology stocks led to the downside amid a risk-off mood for markets

We're starting to see a rotation into defensives, an all too familiar narrative from last year, where the blue-chip Dow would drastically outperform the S&P 500. It's only been one day, but will this theme gather more momentum? Especially in the face of all the gloomy economic data that we've seen in the past 2-3 days.

Economy

Australia’s trade surplus grew to $13.9bn in February from $11.3bn in the previous month and well-above consensus expectations of $11.1bn.

• Largest trade surplus since June 2022

• Exports fell 2.9% month-on-month to $57.0bn but imports fell much more, down 9.1% to $43.2bn

• Consumption goods imports fell -19.3% month-on-month 

China’s services PMI rose to 57.8 in March from 55.0 in the previous month and above expectations of 55.0.

• Highest level in 28 months, signalling a  continued recovery in the services sector following Beijing's reopening earlier this year

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Interesting news and movers

Trading higher

• +15.4% Kalium Lakes (KLL) – Updates on Beyondie SOP Mine

• +14.9% Elanor Investors (ENN) – Acquire Real Estate Funds Management Business

• +8.9% Neometals (NMT) - +8.8%

• +4.9% 4DMedical (4DX) – Signs US hospital contract (Wed)

• +1.3% Adore Beauty (ABB) – Momentum rally, up 21.5% in last three

Trading lower

• -67.0% Energy Resources Aus (ERA) – Ex-rights issue

• -3.6% Queensland Pacific Metals (QPM) – Pullback after up 27% in last three

• Lithium sector move: Winsome (-5.4%), Lake Resource (-4.2%), Leo Lithium (-4.1%), Allkem (-3.5%), Pilbara Minerals (-3.2%), Liontown Resources (-2.6%)

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Broker updates

Citi’s take on RBA Governor’s speech:

• Lowe notes three reasons why Australia is different. First, the increase in mortgage rates has been steeper compared to other countries. Second, wages growth in Australia is running lower compared to developed countries. And lastly, the Board was prepared to let inflation slowly return back to target over time.

• “We believe the final point is most crucial because the RBA is prepared to let inflation run hotter than its peers in order to protect the generational low unemployment rate.”

• “Our view of the terminal cash rate remains unchanged at 3.6%. However,

• we note upside risks to this view.”

• “We don’t believe rate cuts will happen until Q1 next year.”

Citi’s take on global PMIs and copper:

• “Our global manufacturing soft indicators suggest metals consumption is likely to face headwinds and remain subdued in 2023.”

• “We stay bearish copper and expect prices to touch $8k/t over the coming months.”

• “Overall, we see this anticipated pullback as a strong long-term buying opportunity, and in this note we explain some of copper’s unique characteristics that leave us bullish over the medium term.”

Macquarie on the automotive sector:

• “Mar-23 volumes down 3.2% vs pcp (excl. Tesla); +1.6% CY23 YTD.”

• “Tesla CY22 volumes were ~19.6k (1.8% market share) and are currently ~10.4k YTD in CY23.”

• Auto dealer “margins remain resilient across the sector with forward looking commentary at the recent results more upbeat than our expectations.”

• Preference for GUD Holdings (ASX: GUD) 

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Scans