Evening Wrap: ASX rallies and recoups Monday's losses, tech stocks outperform

The S&P/ASX 200 closed 115 points higher, up 1.72%.

The local sharemarket recouped yesterday's losses led by technology and real estate stocks, Australian consumer confidence dips to the lowest level since August, ANZ expects consumption to slow in 2023, the Financials sector rallied to a 2-month high and a glance at lithium stocks.

Let's dive in.

Markets

Wall Street handballed us a strong, risk-on session. A few more market thoughts in the post market brief below.

• 10 out of 11 sectors higher

• A mix of growth and defensives including Tech, Real Estate, Telcos and Discretionary led to the upside

• Energy was the only red sector

• 91% of the top 200 advanced

Announcements

• Hub24 (ASX: HUB) 14.2% noted $3bn of net inflows in the September quarter. Total funds under administration rose 15.4% to $52.4bn compared to the prior period

• Telix Pharma (ASX: TLX) +11.1% presented preliminary data from two separate cancer imaging and therapeutic candidates at the European Association of Nuclear Medicine’s Annual Congress in Spain

• Cochlear (ASX: COH) +2.8% reaffirmed its FY23 guidance of 5-10% net profit growth (8-13% when adjusted for increase in cloud computing-related expenses) at its AGM

• Sayona Mining (ASX: SYA) +2.3% awarded a C$43m contract to Solurail Logistique to transport spodumene concentrate from its North American Lithium project  

• Treasury Wine (ASX: TWE) +2.05% said 1Q23 trading conditions and EBIT has been in-line with expectations. The company reaffirmed its EBIT margin expansion towards 25%+ in FY23

• Tyro Payments (ASX: TYR) +1.9% confirmed media speculation that it has received several takeover offers, including Westpac. The company notes that these approaches are non-binding and preliminary in nature   

• Pilbara Minerals (ASX: PLS) 0.2% posted a record spodumene auction result of US$7,100 a tonne from US$6,988 in the previous September auction

• St Barbara (ASX: SBM) -21.6% posted a -5% decline in 1Q23 gold production which was ‘lower-than-anticipated due to slower than anticipated ramp-up in underground mining equipment’. AISC jumped 67% to $2,490/oz

Broker updates 

• 29 Metals (ASX: 29M) Credit Suisse retains Underperform. TP $1.55 from $1.40

• Adbri (ASX: ABC) UBS retains Neutral. TP $1.58 from $2.00

• Costa (ASX: CGC) Macquarie retains Outperform. TP $2.71 from $3.24

• Evolution (ASX: EVN) Credit Suisse retains Neutral. TP $2.20 from $2.45

• IGO (ASX: IGO) Credit Suisse rates as Outperform. TP $17 from $14.50

• NRW (ASX: NWH) UBS rates as Buy. TP $3.10

• Sandfire (ASX: SFR) Credit Suisse upgrades to Neutral from Underperform. TP $3.75 from $3.55

Economy

• RBA meeting minutes highlights:

  • Core inflation remains sticky: "Although some of the supply-side factors that had contributed to inflation over the preceding year were expected to ease in coming quarters, items such as utilities prices and rents were likely to pick up further and add to inflationary pressures for some time."

  • Business remain confident: "Firms generally were optimistic about the longer term outlook for demand and this was reflected in investment intentions remaining at or above average levels."

  • Wage growth to continue: "Many firms were seeking to raise their headcount, and the increased difficulty finding workers meant that this strong labour demand was likely to result in a further lift in wages growth in coming months."

  • Inflation expectations: "The Bank’s central forecast was for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024."

  • A difficult path: "Members saw the path to achieving this balance (between inflation and interest rates) as a narrow one clouded in uncertainty.

  • Looking ahead: "The Board will continue to monitor the global economy, household spending and wage- and price-setting behaviour closely."

• Australia consumer confidence fell -2.8% to 82.2 last week (10-16 Oct)

  • The lowest level since early August

  • "The weaker AUD along with an uptick in petrol prices over the past couple of weeks likely led to the surge in household inflation expectations to 6%," said ANZ head of Australian Economics, David Plank

  • "This weighed heavily on consumer sentiment, with the subindex that captures whether ‘it is a good time to buy a major household item’ dropping 6.2%."

Commodities 

• Iron ore futures on the Dalian Commodity Exchange rose 0.3%

Quick bites 

• Consumption to slow in 2023: "After a boom in discretionary spending this year, we expect Australian household consumption to slow in 2023. Rate hikes and the roll-off of fixed rate mortgages will be key to the slowdown, which has been delayed by savings buffers & a boom in jobs," said ANZ Research

Source: ANZ Research

Latest news

Post market brief

What a wild week. And its only Tuesday. Markets remain extremely volatile, which makes it difficult to have conviction for either side - both long or short.

Tuesday's strength has likely caught many investors off guard. But given the amount of rallies that have faded in the past few weeks, caution is warranted.

As we mentioned in previous Evening Wraps, the ASX 200 is in a much better state than major US indices, as we've managed to defend June lows. The 6,635 level has proven to be a key level that has managed to hold.

Charts of interest

Index

S&P/ASX 200: A closed above the 50-day moving average. We saw some rather sharp selloffs around the 50-day in the previous two rallies. Let's see how the index holds these levels.

XJO chart (Source: TradingView)

S&P/ASX 200 Financials: Back to a 2-month high and above the 200-day moving average

XFJ chart (Source: TradingView)

S&P/ASX 200 Real Estate: Looks like it was a double bottom after all. Rallying into the 20-day

XRE chart (Source: TradingView)

Stocks

Lithium: Today was a big follow through for yesterday's news about record high Chinese lithium carbonate prices. The strength across lithium stocks was further fuelled by Pilbara Minerals (ASX: PLS) and its record lithium auction result. More broadly speaking, lithium stocks remain quite choppy. Here are a few of interest:

Leo Lithium: Starting to consolidate around 60 cents

(Source: TradingView)

Essential Metals: One of the less volatile charts. Big +10% day.

(Source: TradingView)

Tech: A few tech names are beginning to look interesting. They've held up relatively well in the past few weeks, amid all the volatility. Names of interest include Altium, Data#3 and Wisetech.

Myer

(Source: TradingView)

Scans