Evening Wrap: ASX rallies, consumer confidence bounces, Dow futures higher ahead of CPI print

The S&P/ASX 200 closed 45 points higher, up 0.65%.

The local sharemarket rallies for fourth consecutive day, Ramsay Health Care shares dip as KKR talks collapse, Australian consumer confidence bounces but remains grim and a closer look at agriculture stocks.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 9 out of 11 sectors advanced

• Real Estate stocks led to the upside: the top 13 REITs by market cap were all green

• Energy stocks extended gains thanks to a recovery in oil prices

• Financials also helped lift the index with CBA shares up 1.7%

• Tech stocks underperformed even after the Nasdaq rallied 1.2% overnight

• 76% of the top 200 companies declined

Stocks

• Vulcan Energy (ASX: VUL) +9.9% commenced onsite construction of its Sorption-Demo Plant in Germany, scheduled to start commissioning in late 1Q23 

• Neuren Pharma (ASX: NEU) +4.3% was granted priority review by the US FDA for its trofinetide drug used to treat Rett syndrome

  • The milestone earns Neuren a US$10m milestone payment from its North American partner Acadia 

• Imugene (ASX: IMU) 2.2% raised $80m at 20 cents per share, an 11.1% discount to the stock’s last close

• Ramelius Resources (ASX: RMS) -2.0% upgraded its Mineral Resources by 15% to 6.2m oz of gold

• Neometals (ASX: NMT) -3.8% finalised its internal Engineering Cost Study for a first-stage shredding plant for a potential lithium-ion battery recycling operation in Germany 

• Ramsay Health Care (ASX: RHC) -10.4% advised that the consortium of investors led by KKR were ‘not in a position’ to improve terms of a revised acquisition

• Link Administration (ASX: LNK) -20.1% provided an update on a UK regulatory hurdle it’s facing in relation to the $2.5bn acquisition by Dye & Durham  

Economy

• Australian consumer confidence sentiment was 84.4 in September from 81.2 in July

  • First increase in the Index since November 2021

  • “Consumers may be a little less fearful, but confidence remains very weak,” said Bill Evans, Chief Economist at Westpac

  • “Confidence is only likely to see sustained gains once there is convincing evidence that the inflation threat is easing and the relentless rise in interest rates is nearing an end.”

• Australian business confidence was 10 in August from 8 in July

  • “Cost growth moderated somewhat in August, likely reflecting a range of factors including some easing in commodity prices … growth in purchase costs and labour costs remain very strong,” said NAB Chief Economist Alan Oster

  • “Overall, the survey indicates that demand remained strong through August.”

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange rose 1.9%

• Copper rose 1.7% to US$3.6/lb, prices are up 6.4% in the last five sessions

Latest news

Scans

Post market charts

S&P/ASX 200: Another green candle. The sheer momentum has helped the 20-day and 50-day start to slope positive. We're around 0.5% away from the 200-day moving average. In the event of a pullback, the index needs to show an orderly pullback, not the volatile and heavy selling we saw a month earlier.

XJO chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Materials: Chart looks very similar to the broader index. I took another look at why there might be some short-term optimism surrounding China's steel production and iron ore demand.

S&P/ASX 200 Tech: On Monday, we talked about how the Tech Index continues to push. But individual names like WiseTech (ASX: WTC) and Xero (ASX: XRO) started to stall and fall from session highs. The Tech sector underperformed on Tuesday, down -0.3%. Again, in the event of a pullback, it needs to be able to defend key moving averages like the 20 and 50.

XIJ chart (Source: TradingView, Annotations by Market Index)

Sectors and stocks

Taking a look at soft commodities: Corn and wheat prices are starting to pick up after a topping out earlier this year. Soybean prices soared on Monday after drought-stressed US crop reports flagged 'shockingly' tight supplies, according to Bloomberg.

Corn (top left), Wheat (top right), Cattle (bottom left) and Lumber (bottom right)

And now local agriculture stocks: A few names are starting to consolidate after similar topping patterns as the above commodities. The main names that come to mind include Australian Agricultural Company (ASX: AAC), Select Harvests (ASX: SHV) and Graincorp (ASX: GNC).

Australian Agricultural Company chart (Source: TradingView, Annotations by Market Index)

Select Harvest chart (Source: TradingView, Annotations by Market Index)

Lithium still going: On Monday, we noted some large cap names like Allkem (ASX: AKE), Liontown Resources (ASX: LTR) and Lake Resources (ASX: LKE) starting to stall, closing the session down 2-3%. And on the flip side, a few names continued to defy gravity and push higher. On Tuesday, they just kept on rallying. Core Lithium (ASX: CXO) and Pilbara Minerals (ASX: PLS) both hit fresh all-time highs. Most names were green but performance varied. Wild.

Food for thought

US inflation print: The CPI print is due at 10:30 pm AEST. Inflation is expected to fall -0.1% month-on-month, the first in two years thanks to falling energy prices. Year-on-year, headline inflation is expected to fall to 8.1% in August from 8.5% in July. Core inflation is forecast to stay unchanged at 5.9%.

S&P 500 on CPI print days: Year-to-date, 6 out of 8 inflation prints have been hotter-than-expected. The S&P 500 fell every time inflation surprised to the upside, down an average -1.26%. The latest print in August (for July CPI) was cooler-than-expected and inspired a 2.15% rally.

A possible soft landing: JP Morgan said "... economic data and investor positioning are more important factors for risky asset performance than central bank rhetoric. And the data appear to be increasingly supportive of a soft landing ... should thus continue to provide tailwinds for risky assets ...”

Oil to come close to a surplus: US Energy Information Administration's short-term outlook for world liquid fuel production and consumption. The forecast suggests a stock build and production levels above consumption for Q3 and Q4. Not exactly in-line with all the underinvestment and supply tight narrative we've seen over the past few months.

Source: US Energy Information Administration