Evening Wrap: ASX 200 soars as investors snap up bargains

The local index added to its winning streak helped by a big jump in Block, but the rally was substantially broad based. This year's dogs led the way, with solid gains in Property and Healthcare, as well as a notable resurgence in Lithium.

Let's dive in.

Make that four in a row for the ASX 200 (Source: Market Index)

Markets

The benchmark S&P/ASX 200 made it four-from-four today in another substantial and broad based rally. Looking at my chart below, you can see how confidence actually grew through the last 3-days rally with larger white candles. Today's close near the high is another important indicator of investor confidence, and hints of further gains ahead.

Watch those white candles

Gainers outweighed losers by a whopping 4.8-to-1 indicating the love was shared right across the spectrum of Aussie stocks. Once again, daily best performers correspond to the worst performers over the past 12-months.

The S&P/ASX200 Property Sector (XPJ) +2.1% was best today, but is the second worst on a rolling 12-month basis. Notable: Unibail-Rodamco-Westfield (ASX: URW) +6.9%, Cromwell Property Group (ASX: CMW) +5.7%, and Charter Hall Group (ASX: CHC) +3.7%.

The S&P/ASX200 Healthcare Sector (XHJ) +1.9% was second best today, but is the worst on a rolling 12-month basis. Notable: Imugene (ASX: IMU) +3.5%, Neuren Pharmaceuticals (ASX: NEU) +2.8%, and Opthea (ASX: OPT) +2.5%.

Plenty of bottom fishing also in a resurgent ASX lithium sector today. Lithium prices continued to slide today, so apart from a modest bounce in their US counterparts overnight, there's little to explain local moves apart from bargain hunting and short covering. Notable: Sayona Mining (ASX: SYA) +9%, Core Lithium (ASX: CXO) +8.5%, Piedmont Lithium (ASX: PLL) +4.6%, Liontown Resources (ASX: LTR) +4.4%, Allkem (ASX: AKE) +3.9%, and IGO (ASX: IGO) +3.6%.

Economy

The Caixin China Services PMI confirmed its manufacturing counterpart released earlier in the week. The Chinese economy appears to be sliding backwards again. At 50.4 for October, activity in the Chinese Services sector remained modestly in expansion territory, but was below the 51.0 forecast by economists (the Manufacturing sector dropped back into contraction based upon data released on Wednesday).

Watch out tonight for what is considered the most important monthly data point for economists - the US Non-Farm Payroll report. Released each first-Friday of every month, it details the health of the US jobs market. Economists expect 178,000 jobs were created in the US economy last month and the unemployment rate to remain steady at 3.8%. Average hourly earnings are expected to blip higher to +0.3% from September's +0.2%.

A substantially stronger than expected jobs report could reignite fears of further rate cuts from the Fed, and therefore possibly derail the current rally!

Latest news

Block blows analysts away with big upgrade

Pop! Massive 'gap and run' in block shares after profit target update

US$1.94 billion versus US$2.4 billion. That's the difference between consensus estimates for Block's 2024 earnings and the amount the company offered as its new target in its latest earnings update.

Nice upgrade. But, as they say in the late-night TV ads, there's more! A US$1 billion share buyback. Block also beat its quarterly revenue estimates as both Square and Cash App segments recorded double-digit profit growth.

From a technical perspective, massive gaps accompanied by high closes are usually very bullish. Such moves indicate a major shift in investor sentiment, and when they occur at the bottom of an established downtrend, can often signal the start of a major turnaround.

Can I have some more please?

Investors fail to see silver lining in Aussie Broadband placement, update

Aussie Broadband is targeting a fully underwritten institutional placement to raise $120 million as well as a $15-20 million share purchase plan. The placement price will be determined via a book build commencing at $3.55, hence today's plunge towards that level.

The company noted proceeds would be used to strengthen its balance sheet ahead of the upcoming Symbio (ASX: SYM) take over.

Aussie Broadband also reaffirmed its FY24 profit guidance for EBITDA of $100-$110 million, and this remains well ahead of FactSet consensus of $89.6 million. It seems Investors failed to see the silver lining.

The short term trend for Aussie Broadband appears to have well and truly turned down. The long term uptrend remains intact while the price continues to trade above the long term trend ribbon (dark green), but today's candle indicates very limited demand despite investors being presented with substantially lower prices.

Interesting news and movers

Trading higher

• +31.3% Pantoro (PNR) – Norseman project update

• +10.95% Sayona Mining (SYR) – Drill update

• +9.8% Retail Food Group (RFG) – Denies takeover speculation

• +8.5% Neuren Pharma (NEU) – Acadia Q3 results

• +6.7% Genex Power (GNX) – K2-Hydro project update

• +4.3% Impedimed (IPD) – United Healthcare policy amendment

• +3.0% Pilbara Minerals (PLS) – UBS update

Trading lower

• -27.2% Integral Diagnostics (IDX) – Q1 trading update

• -8.8% Treasury Wine (TWE) – Placement

• -4.6% Bowen Coking Coal (BCB) – Placement

• -0.9% Delta Lithium (DLI) – Approval of mining proposal

Broker notes

A few Citi notes of interest:

Can gold catch a bid into year end:

• “We are tactically neutral bullion markets in the short-term as prices and COMEX positioning have rebounded.”

• “December futures are now trading near our published $1,980/oz 4Q price forecast and should remain buttressed into year-end, well above the post-September FOMC price lows between $1,815-1,825/oz.”

• “The rally in US rates and US dollar depreciation can support gold prices albeit higher equities, declining cross-asset vols, and weak financial gold seasonals are potential headwinds.”

• “We still expect record average gold prices next year, targeting a $2,150/oz point-price in mid-2024.”

Where is cost support for lithium:

• “We’ve updated our CY23e all-in sustaining cost curve which covers ~95% of Australian supply with ASIC cost support at around US$1,300/t.”

• “That said current, all-in cost support (i.e. including project capex) is closer to US$1,700/t, above our LT (real) SC price of US$1,600/t as miners spend money ramping up production.”

Scans