Evening Wrap: ASX rallies, iron ore reclaims US$100, lithium stocks still running hot

The S&P/ASX 200 closed 46 points higher, up 0.66%.

The local sharemarket rallied for a second consecutive session, iron ore prices reclaim the US$100 level, China's inflation cools to 2.5% in August and US CPI data due next Tuesday.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 5 out of 11 sectors higher

• Materials led following a rebound in iron ore prices

• Energy also outperformed as oil prices finish the week on a more positive note

• Defensive sectors including Staples, Real Estate and Telcos underperformed

• 46% of the top 200 companies advanced

Stocks

• Mineral Resources (ASX: MIN) +13.4% responded to media speculation about the potential listing of its lithium business

  • “MinRes wishes to advise that, in the normal course of business, it regularly evaluates various strategic options to maximise value creation for shareholders, including in relation to its lithium business.”

• Yancoal (ASX: YAL) +5.2% majority shareholder, Yankuang Energy terminates its takeover given ‘market conditions’ 

• PointsBet (ASX: PBH) +5.1% has taken its first retail sportsbook bet in Maryland - the company’s 12 sportsbook operation in the US 

• Lithium Power International (ASX: LPI) -6.5% successfully raised $50m at 60 cents per share (13.7% discount to last close) to accelerate the development of its Maricunga Project   

Economy

• China’s consumer price index rose 2.5% year-on-year in August from 2.7% in July

  • Consensus expected a rise of 2.8%

  • Opens the door for more stimulus measures from the Chinese government, without the need to worry about inflation rising above the 2-3% target 

• China’s producer price index rose 2.3% year-on-year in August from 4.2% in July

  • Consensus expected a rise of 3.1%

  • Slowest pace since February 2021 due to weaker oil and raw material prices

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange rallied 3.95%

• Copper futures rose 2.1% to US$3.6/lb, up 5.7% this week

• Brent crude oil rose 1.04% to US$89.4 a barrel, still down -4.2% this week

Scans

Latest news

Post market charts

S&P/ASX 200: A two-day bounce from oversold levels. Close to recouping half the losses from the recent selloff. Need to see how the Index behaves as it approaches the key 20-day and 50-day moving average. 

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

S&P/ ASX 200 Info Tech: Is on a four-day winning streak, seeing several names like Altium (ASX: ALU) and Wisetech (ASX: WTC) push from recent trading ranges. 

S&P/ASX 200 Energy: Starting to get volatile, especially given the bi-polar macro picture as demand destruction (Chinese lockdowns, European recession, rising interest rates etc.) takes on tight supply (gas to oil switching, capex underinvestment, OPEC production cuts etc.) Pendulum will continue to swing both ways. Which narrative will be louder?

XEJ chart (Source: TradingView)

Sectors and stocks

Lithium majors can’t stop: Still running hot. Can’t help but to feel that these stocks are getting really extended. Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) both hit all-time highs again, up 20% and 27% respectively this week. Things can start to get a little volatile at such parabolic levels.

Core Lithium: Starting to stall around previous highs.

Core Lithium chart (Source: TradingView, Annotations by Market Index)

Paladin Energy: Faced some selling pressure around the trendline.

Paladin Energy chart (Source: TradingView, Annotations by Market Index)

Altium: Pushed through this $37.25 area. 

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

CSL: Still settling just below the $300 level.

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

Myer: Revisiting this breakout from a few days ago. Quite extraordinary to have pushed almost 25%.

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

Food for thought

US CPI next week: US inflation data will be released next Tuesday at 10:30 pm AEST. Consensus expects headline inflation to fall to 8.1% in August from 8.5% in July. Core inflation is expected to remain unchanged month-on-month at 5.9%.

Bank of America thoughts on August CPI: “We look for headline CPI to decline by 0.1% month-on-month, its first decline since May 2020, and for core CPI to advance by 0.3% month-on-month. This would leave headline and core CPI up 8.2% and 6.0% year-on-year, respectively … Elevated wages should continue to put upward pressure on food away from home inflation, and though commodity prices have declined recently, this will take time to pass through to consumer prices.”  

Fed rate hike outlook: CME’s Fedwatch tool sees an 84.0% likelihood of a 75 bps rate hike at the September meeting followed by a 50 bps hike in November and 25 bps in December. 

Source: CME Group