Evening Wrap: ASX tumbles to 7-week low, tech stocks surprisingly green

The S&P/ASX 200 closed 97 points lower, down -1.4%.

The local sharemarket copped another beating as Europe's energy crisis intensified and China sticks to its 'zero-covid' strategy.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

What an ugly day for the ASX 200. Goldman Sachs estimates that energy bills could peak early next year at ~500 euros a month, up 200% compared to 2021. For Europe as a whole, this implies a 2tn euro surge in energy bills or approximately 15% of Eurozone GDP. Grim.

• 2 out of 11 sectors advanced

• Tech and Healthcare sectors were green

• Financials, Materials, Utilities and Energy sectors fell more than -2%

• 72% of the top 200 companies declined

Stocks

• Alkane Resources (ASX: ALK) +2.9% intersected significant copper and gold mineralisation at its Kaiser Prospect in NSW. Management said the company has the potential to “be a large tier one gold-copper project.” 

• Metcash (ASX: MTS) +0.5% posted 8.9% sales growth for the 17 weeks to 28 August

  • Trading update presentation: “We are experiencing and managing increased supply chain and labour cost pressures.”

  • “Inflation remained high, particularly in Trade, albeit there are signs of some easing with an improvement in the availability of supply.” 

• Lake Resources (ASX: LKE) +0.4% appointed David Dickson as new CEO and Managing Director. Mr Dickson was previously CEO of global engineering and construction firm McDermott International 

• Hastings Technology Metals (ASX: HAS) -18.1% successfully raised $110m at 4.40 per new share, an 18.8% discount to its last close. Proceeds will be used to accelerate its Yangibana Rare Earths Project in WA 

Economy

• Australian GDP rose 0.9% QoQ in the June quarter from 0.7% in the March quarter

  • In-line with the market and RBA's expectations

  • "Rises in household spending and exports drove growth in the June quarter. This is the third consecutive quarter of economic growth, following a contraction in the September quarter 2021, which was impacted by the Delta outbreak,” said Sean Crick, head of National Accounts at the ABS

  • “Households increased spending on domestic and international travel as COVID restrictions further eased and international borders remained open. While spending on transport grew strongly, households were still only spending two thirds of what they did pre-pandemic,” he added

• China’s balance of trade weakened to US$79.4bn in August from US$101.3bn in July

  • Exports rose 7.1% year-on-year but down from an 18.0% gain in July

  • Growth is slowing as the economy cycles elevated exports from last year but also weakened due to more covid restrictions and heatwaves disrupting industrial output 

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange fell -1.0%

• Copper futures down -1.4% to US$3.4

  • Erased most of Tuesday's 1.4% gain

• Brent crude oil down -1.7% to US$91 a barrel, a fresh 7-month low

• Newcastle coal futures eased -1.7% to US$450 a tonne

Scans

Latest news

Post market charts

S&P/ASX 200: We broke through the lows we've been trying to hold for the past three days. Also snapped right through the June high area of support. The 20-day (red) is rather downward sloping and crossing below the 50-day (green). Is the ASX 200 oversold? Arguably yes. When will it bounce? Who knows.

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

S&P/ASX 200 Energy: Volatility really picking up, especially on the back of Chinese lockdowns and Europe's energy crisis. Given the failure to push above recent highs, this area could become a point of resistance.

XEJ weekly chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Info Tech: Very surprising to see tech names hold up relatively well on a rather risk-off day.

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

Stocks and sectors

It's hard to feel bullish when every headline seems to be talking about a deep recession in Europe, China in lockdown and PMIs falling into contraction. Now is a good time to see what cream will float to the top (or rather, hold up the best).

Lithium unphased: If you looked at lithium names, you might guess that the ASX 200 closed around breakeven. Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS) were mostly unchanged. Performance across small-to-mid cap names varied, but fell no more than 2-3%.

Altium: Is holding its post-earnings gap up pretty well. Up 0.2% on a rough day like today.

Altium chart (Source: TradingView)

Pro Medicus: Has a pretty similar chart as CSL (ASX: CSL). Both holding up pretty well and forming bases.

Pro Medicus chart (Source: TradingView)

Food for thought

Flurry of Fed talk: Plenty of speeches from Fed policymakers on Wednesday night including Barkin, Mester and Brainard. Will we hear anything other than the 'hike till the job is done' message?

It can take a long time for inflation to come down: "We find that it takes two and a half years and possibly more than four years before inflation returns to 2%, which in the current setting would mean that inflation might not normalised before earliest during the summer or autumn 2024," according to Danske Bank Research.

Source: Danske Bank

Market bottoms when Fed cuts, not when it hikes: Just a friendly reminder from Bank of America that the market typically does not bottom when the Fed is still hiking. But rather, when it starts cutting rates.

Source: Bank of America