Evening Wrap: ASX 200 trades sideways, uranium and tech stocks rally, US futures tick lower

The local sharemarket struggles to find upside after a V-shaped rally, all eyes on the Fed's interest rate hike on Thursday, uranium and tech stocks surge and three brokers retained a Sell rating for Fortescue after a bumper December quarter update.

Let's dive in.

Markets

Nothing much to see here: The ASX 200 is stalling after a monster ~8% run in the past three weeks.

• Tech stocks continue to shine in parallel with a rotation back to megacaps and last year's losers on Wall Street

• Defensive sectors underperform with heavyweights Woolworths, Coles and CSL down between 0.5% and 1.0%

• Miners ease despite iron ore prices steadily grinding higher, up 1.5% to US$128.9 a tonne

Economy

No major economic updates. Although the rest of the week is absolutely stacked with Eurozone GDP and inflation data, China manufacturing PMIs, the Fed, BoE and ECB’s interest rate decision and US unemployment figures. Regarding the interest rate decisions:

• Fed: 25 bps full priced hike

• ECB: 50 bps priced but 75 bps is possible

• BoE: 50 bps priced but 75 bps is possible

• Language and signals will be key; the December FOMC minutes flagged the “unwarranted” loosening in financial conditions

Latest news

Post market brief

A few sectors of interest on Monday:

Uranium: Most uranium names finished the day up 4-7%. The sector is starting to show some signs of life after more than 18 months of sideways action.

Tech: Lots of tech names making moves on Monday, including Wisetech (+5.6%), Xero (+3.1%), NextDC (+3.7%) and Block (+4.1%). The ATEC ETF pushed trough the 200-day moving average.

Betashares ATEC ETF (Source: TradingView)

Oil: Israel carried out a drone strike against a defense compound in Iran over the weekend. This isn't sparking any major moves for oil markets. But worth keeping an eye on.

Interesting news and movers

Trading higher

• Core Lithium (CXO) +8.9% – Reported Q2 cashflow

• Calix (CXL) +6.6% – Solar Methanol Project awarded Aus/German gov’t funding

• Deep Yellow (DYL) +6.1% – Sector wide move

• Accent Group (AX1) +4.3% – Continuation rally, up more than 10% in last three days

• Polynovo (PNV) +4.2%

• Block (SQ2) +3.8%

Trading lower 

• Jervois Global (JRV) -11.3% – Q2 NPAT ($32.6m)

• Mount Gibson Iron (MGX) -8.1% – Q2 update

• Champion Iron (CIA) -7.1% – Downgraded to Underperform from Buy at CSLA

• Insurance Group (IAG) -3.7% –  NZ flooding may impact FY23 natural peril costs

• Suncorp (SUN) -1.95% – NZ flooding update, losses capped at NZ$50m 

Broker updates 

Fortescue – Three brokers remain Sell rated 

• The average target price among the three brokers was $16.78

• Morgan Stanley: Operationally strong with most production and cost metrics 1-4% better than estimates

• Citi: FMG is up 15% in the past month and trades at ~1.3 times DCF versus Rio Tinto at 1.0 times, so relatively expensive compared to peers

• Macquarie: Uncertainty re funding requirements for FFI and likely impact on dividends remains a key medium-term concern

Wisetech – Investing in core software

• Morgan Stanley: Target raised to $64.00 from $62.00; Maintains Overweight rating

• Notes: “The acquisition of Evase supports our positive investment thesis … that Wisetech’s leadership position is becoming clearer.”

Champion Iron – Higher prices but higher costs

• Citi: Retains $8.40 target price; Maintains Buy

• Notes: “Champion Iron is a hard-to-find mining production growth story with valuation upside which also benefits from steel decarbonisation trends.” Though, C1 cash costs for the December quarter was up sharply to C$76/t reflecting higher fuel, explosive and maintenance costs

Global Lithium – “Upside Potential Remains”

• Macquarie: Retains $4.20 target price; Maintains Buy

• Notes: Manna Project scoping study to de-risk the project. Scoping study result scheduled for 1Q23. Manna resource update also due in 2023, incorporating an additional ~20km of drilling 

Scans