Match made in Energy Heaven! Brokers weigh in on Woodside - Santos merger
Fri 08 Dec 23, 2:50pm (AEST)
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/Evening Wrap: Boom! Lithium shorts scramble to cover, Energy pops on mega-merger
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Market Wraps
/Evening Wrap: Boom! Lithium shorts scramble to cover, Energy pops on mega-merger
Market Wraps
Evening Wrap: Boom! Lithium shorts scramble to cover, Energy pops on mega-merger
Fri 08 Dec 23, 5:25pm (AEDT)
Stocks in article
The S&P/ASX 200 closed 21.6 points higher, up 0.30%.
Another limit up move in GFEX lithium carbonate futures spurred a second day of frantic short covering in ASX lithium stocks. Elsewhere, the energy sector was again buoyed by the mega-merger between Woodside Energy and Santos. By the close, the S&P/ASX 200 closed out a cracker of a week, logging its best close since 19 September.
Let's dive in.
Today in Review
Fri 08 Dec 23, 5:05pm (AEST)
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Markets
ASX 200 Session Chart
Aussie investors weren't shy today, buying all the way into the weekend
The S&P/ASX200 (XJO) finished 21.6 points higher at 7,194.9, smack-bang on its session high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 164 to 105.
Both factors are important for the sustainability of the current rally. A high close indicates unfulfilled demand, and a broad based move indicates capital is spreading out across the risk spectrum.
For the week, the XJO finished up an impressive 121.7 points or 1.7% higher.
The S&P/ASX 200 Energy Sector (XEJ) +1.0% made it two in a row as the best performing sector today - again as the possible Woodside-Santos merger sparked hopes of more M&A in the sector. To be fair, the XEJ has been absolutely belted since August, so you can't blame investors for kicking around for some bargains.
Absolutely belted, the WDS-STO merger couldn't have come at a better time!
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
|---|---|---|---|---|---|
Santos (STO) | $7.25 | +$0.42 | +6.1% | -0.7% | 0% |
MMA Offshore (MRM) | $1.580 | +$0.06 | +3.9% | +22.5% | +102.6% |
Terracom (TER) | $0.395 | +$0.015 | +3.9% | +21.5% | -53.5% |
Beach Energy (BPT) | $1.490 | +$0.03 | +2.1% | -2.3% | -18.1% |
Strike Energy (STX) | $0.385 | +$0.005 | +1.3% | +1.3% | +28.3% |
Yancoal Australia (YAL) | $4.94 | +$0.05 | +1.0% | +3.8% | -12.4% |
Nexgen Energy (Canada) (NXG) | $10.13 | +$0.1 | +1.0% | +12.6% | +68.0% |
New Hope Corporation (NHC) | $5.03 | +$0.03 | +0.6% | -4.7% | -10.0% |
Whitehaven Coal (WHC) | $7.20 | +$0.04 | +0.6% | +4.3% | -26.6% |
Do you see any bargains in this list? Some of those yearly changes could hold the clue...
Also doing well today was the S&P/ASX 200 Materials Sector (XMJ) +0.6%. Like energy stocks, lithium stocks logged their second strong day of gains. Again, they responded to another 10% limit up move in GFEX lithium carbonate futures. Gains today were more broad-based then yesterday, larger, and probably stoked by more than just a little short covering!
GFEX Lithium Carbonate Futures January 2024 contract. Source: SMM
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
|---|---|---|---|---|---|
Latin Resources (LRS) | $0.250 | +$0.065 | +35.1% | -2.0% | +85.2% |
Sayona Mining (SYA) | $0.061 | +$0.007 | +13.0% | -29.9% | -73.5% |
Wildcat Resources (WC8) | $0.750 | +$0.08 | +11.9% | -12.3% | +2578.6% |
Ioneer (INR) | $0.160 | +$0.01 | +6.7% | -3.0% | -71.2% |
Allkem (AKE) | $9.16 | +$0.38 | +4.3% | -0.9% | -34.6% |
Liontown Resources (LTR) | $1.380 | +$0.055 | +4.2% | -11.3% | -28.7% |
Piedmont Lithium Inc (PLL) | $0.380 | +$0.015 | +4.1% | -11.6% | -56.3% |
Core Lithium (CXO) | $0.265 | +$0.01 | +3.9% | -32.1% | -79.8% |
Vulcan Energy Resources (VUL) | $2.24 | +$0.08 | +3.7% | -10.8% | -69.6% |
Pilbara Minerals (PLS) | $3.71 | +$0.13 | +3.6% | -0.5% | -19.5% |
Mineral Resources (MIN) | $62.49 | +$1.76 | +2.9% | +4.3% | -30.1% |
Global Lithium Resources (GL1) | $1.285 | +$0.03 | +2.4% | +8.0% | -44.9% |
IGO (IGO) | $8.18 | +$0.15 | +1.9% | -11.7% | -46.4% |
Short sellers' worst nightmare! Source: SMM
Doing it tough today was the S&P/ASX All Ordinaries Gold Sub-Index (XGD) -0.8%. Nothing major here in terms of sector drivers - yes gold prices have eased from their recent record highs, but as you can see from the chart below, short-and-long term trends remain up.
Gold is possibly suffering from what might happen next...
I can't speak for all traders, but technical analysts are no doubt focused on that big reversal candle on 4 December. That's the one which tickled a bunch of stops above US$2,100/oz before plunging back to close near the lows of the session. It's a clear sign that there was limited demand above US$2,100 as well as some concerted profit taking.
I acknowledge candles like that logged on the 4th are potential trend killers, but I am encouraged by the lack of a follow through sell off since. Small candle ranges holding above the 20 Oct high of US$2,019 tells me there's still plenty of demand in the system despite this bearish signal. As long as the price continues to trade above my short term trend ribbon (light green zone), I'll retain a bullish bias on gold.
Company | Last Price | Change $ | Change % | 1-month Perf % | 1-year Perf % |
|---|---|---|---|---|---|
Westgold Resources (WGX) | $2.20 | +$0.06 | +2.8% | +7.3% | +182.1% |
Resolute Mining (RSG) | $0.435 | +$0.01 | +2.4% | +17.6% | +123.1% |
Capricorn Metals (CMM) | $4.41 | +$0.07 | +1.6% | -5.2% | -7.9% |
Bellevue Gold (BGL) | $1.815 | +$0.025 | +1.4% | +31.5% | +50.0% |
Silver Lake Resources (SLR) | $1.140 | +$0.015 | +1.3% | +3.6% | -12.6% |
Ramelius Resources (RMS) | $1.590 | +$0.005 | +0.3% | -3.3% | +68.3% |
Perseus Mining (PRU) | $1.870 | -$0.005 | -0.3% | +6.6% | -16.5% |
Regis Resources (RRL) | $1.895 | -$0.01 | -0.5% | +4.4% | -5.3% |
Northern Star Resources (NST) | $12.60 | -$0.08 | -0.6% | +6.2% | +17.8% |
Genesis Minerals (GMD) | $1.840 | -$0.015 | -0.8% | +22.7% | +47.8% |
Evolution Mining (EVN) | $3.60 | -$0.05 | -1.4% | -1.6% | +25.9% |
West African Resources (WAF) | $0.925 | -$0.02 | -2.1% | +9.5% | -15.1% |
Emerald Resources (EMR) | $2.56 | -$0.15 | -5.5% | -0.4% | +122.6% |
Don't write off the gold chart, and therefore gold stocks, just yet. Source: SMM
Economy
There weren't any major data releases today.
What to watch out for...
USA Non-Farm Payrolls - widely considered the most important monthly global data point. Economists predict the US economy added 184,000 jobs in November, up from the 150,000 jobs added in October.
The private sector ADP report released on Wednesday surprised to the downside with just 103,000 jobs created - far less than the 131,000 jobs growth economists were expecting. So tonight's jobs data, along with the release of wages growth (+0.3% expected) and the unemployment rate (3.9% steady expected), will be closely watched.
Markets are getting a boost from anything which even resembles weaker growth at the moment - on the basis it means the Fed is going to cut next, not hike. But, in my experience of these scenarios, there comes a time where bad economic news is just that - bad for stocks!
Latest News
Interesting Movers
Trading higher
+35.1% Latin Resources (LRS) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+13.0% Sayona Mining (SYA) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+6.7% Ioneer (INR) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+6.1% Santos (STO) - Santos responds to media speculation
+4.7% Syrah Resources (SYR) - Lithium bounce spread to graphite!
+4.3% Liberty Financial Group (LFG) - No news
+4.3% Allkem (AKE) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+4.2% Liontown Resources (LTR) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+4.1% Piedmont Lithium Inc (PLL) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+3.9% MMA Offshore (MRM) - Energy sector rally on back of mega-merger
+3.9% Terracom (TER) - Energy sector rally on back of mega-merger
+3.9% Core Lithium (CXO) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+3.7% Vulcan Energy Resources (VUL) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
+3.6% Pilbara Minerals (PLS) - GFEX lithium carbonate futures 10% limit up, sector short covering rally
Trading lower
-5.5% Emerald Resources (EMR) - No news since 07-Dec Change in substantial holding (reduction T. Rowe Price 9.52% to 8.51%), gold sector pullback
-4.3% Zimplats Holdings (ZIM) - Gold sector pullback
-4.2% Ricegrowers (SGL) - No news
-4.1% Audinate Group (AD8) - No news
-3.8% Deep Yellow (DYL) - No news
-3.7% Renascor Resources (RNU) - No news
-3.6% Cettire (CTT) - No news
-3.6% Superloop (SLC) - No news
Broker Notes
Alumina (AWC) upgraded to neutral from underperforrm at Macquarie; Price Target: $0.80
Downer EDI (DOW) retained at accumulate Ord Minnett; Price Target: $5.60
Data#3 (DTL) initiated overweight at Wilsons; Price Target: $9.09
Dexus (DXS) retained at buy Ord Minnett; Price Target: $10.80
Deep Yellow (DYL) initiated speculative buy at Morgans; Price Target: $1.47
Genesis Minerals (GMD) downgraded to neutral from outperform at Macquarie; Price Target: $2.00 from $1.90
Gold Road Resources (GOR) downgraded to neutral from outperform at Macquarie; Price Target: $2.00
Latin Resources (LRS) retained at buy Bell Potter; Price Target: $0.46 from $0.47
Meteoric Resources (MEI) retained at outperform Macquarie; Price Target: $0.46
Magellan Financial Group (MFG)
Retained at buy UBS; Price Target: $10.50
Retained at neutral Goldman Sachs; Price Target: $7.55
Medibank Private (MPL) retained at neutral Goldman Sachs; Price Target: $3.65
NIB Holdings (NIB) retained at buy Goldman Sachs; Price Target: $8.40 from $8.75
National Storage Reit (NSR) retained at buy Citi; Price Target: $2.60
Propel Funeral Partners (PFP) retained at outperform Macquarie; Price Target: $5.95
Polynovo (PNV) retained at lighten Ord Minnett; Price Target: $1.00
Perpetual (PPT)
Retained at accumulate Ord Minnett; Price Target: $27.50
Retained at buy Bell Potter; Price Target: $27.09
Retained at neutral UBS; Price Target: $23.50
Regis Healthcare (REG) upgraded to buy from accumulate at Ord Minnett; Price Target: $3.50 from $3.10
Rio Tinto (RIO) retained at overweight Morgan Stanley; Price Target: $146.00 from $134.50
Washington H Soul Pattinson & Company (SOL) retained at lighten Ord Minnett; Price Target: $26.90
Treasury Wine Estates (TWE)
Retained at neutral Citi; Price Target: $11.80
Retained at buy UBS; Price Target: $13.75
Wisetech Global (WTC) retained at neutral Citi; Price Target: $71.75
Scans
Carl has over 30-years investing experience, helping investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
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