Evening Wrap: Dovish RBA inspires broad-based ASX rally, Pilbara Minerals hits all-time high

The S&P/ASX 200 closed 119 points higher, up 1.77%.

 The local sharemarket ripped higher thanks to a dovish speech from RBA Governor Lowe, large cap lithium stocks rally to fresh all-time highs, Tyro rejects a generous takeover bid and Terra Uranium rallies 80% on its ASX debut.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 10 out of 11 sectors higher

• Growth-heavy sectors including Tech and Discretionary outperformed

• Defensive sectors underperformed

• Energy fell an outsized -2.8% as oil prices rolled over

• 84% of the top 200 companies advanced

Stocks

• Tyro Payments (ASX: TYR) +27.9% rejected a non-binding indicative proposal from a consortium of private equity investors led by Potentia Capital. The offer valued Tyro at $1.27 per share

• Imugene (ASX: IMU) +6.8% announced the first patient has been dosed in the nextHERIZON Phase 2 clinical trial to treat gastric cancer 

• Link Administration (ASX: LNK) +6.3% received confirmation from the ACCC that it will not oppose the takeover by Dye & Durham Corporation  

• De Grey Mining (ASX: DEG) +5.4% delivered a preliminary feasibility study for its Mallina Gold Project in the Northern Territory. Key findings include:

  • Average total annual gold production of 540,000 oz per annum over the first 10 years

  • Net present value of $2.7bn post-tax

• Australian Strategic Materials (ASX: ASM) +2.9% signed a binding sales agreement for NdPr produced at the company’s Korean Metals Plant with NS World

  • The sales agreement provides for the sale and delivery of up to 10 tonnes of NdPr metal ingot from September 2022 to December 2022 

Economy

• Australia’s balance of trade fell to $8.73bn in July from $17.1bn in June

  • Exports fell -9.9% month-on-month to $6.08bn due to declines in coal and metals

  • Imports rose 5.2% to $45.5bn driven by a rise in travel debits

• RBA Governor Lowe speech highlights:

  • Inflation outlook: “We are expecting CPI inflation this year to be around 7.75%.”

  • Trying to find balance: “It is seeking to do this (raise rates) in a way that keeps the economy on an even keel; it is possible to achieve this, but the path here is a narrow one and it is clouded in uncertainty.”

  • Lags in monetary policy: “We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly. And we recognise that, all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.”

  • Subject to change: “The Board is not on a pre-set path, especially given the uncertainties that I have spoken about.” 

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange rose 2.8%

  • China's iron ore imports fell -3.1% year-on-year over January to August 2022

  • Steel exports dipped -4.0% over the same period

Scans

Latest news

Post market charts

S&P/ASX 200: Volatile eh? It’s one of those bounces where you’re not sure if the market will just V-shape back up or if it's giving you a false sense of security and a margin call the next day. We bounced from oversold levels - that's great. But a lot more is needed to make up for the volatile downward spiral we experienced in the last 2-3 weeks.

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

S&P/ ASX 200 Info Tech: I’ve been quite surprised to see tech names hold up contrary to the risk-off attitude towards things like Ark and Bitcoin. Plus the textbook headlines tech valuations experience amid hawkish central banks. The Tech Index has pushed above a month long downward channel.

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

Sectors and stocks

Another lithium comment: Yes, we’re talking about lithium again. On Wednesday, we looked at how most names were green even though the ASX 200 rolled over -1.42%. A leading sector like lithium has shown its ability to withstand such hard selloffs and it's often these leading sectors that bottom out well-before the market does (more broadly speaking).

Again, it was large caps that led the sector, with Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) rallying into all-time highs. Other household favourites like Core Lithium (ASX: CXO) and Liontown Resources (ASX: LTR) aren’t too far off either.

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

Uranium grinds higher: Uranium is also starting to show some leadership characteristics. Although, you’d have to see it to believe it - given most stocks have been trading sideways for the last 12 months. Still, most ASX-listed uranium names have continued to push higher even as the broader market deteriorated. It’ll be interesting to observe how these stocks perform if they push into prior highs.

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

Altium trying to move out: Trying to break out of the recent range.

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

CSL trying to break out: Has been trading sideways for around 2 months. You can see a V-shaped intraday rally on 17 August, the day of the company's FY22 results. See how it behaves around the $300 level.

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

Food for thought

Oil tends to overshoot on the way up and down: Oil tends to rip or dip too much. "Don't be surprised if oil breaks multiple major supports before finding its equilibrium," said Game of Trades, an independent investment research platform

Source: Game of Trades

China buys the copper dip: China's copper imports jumped 26% year-on-year in August. “Lower copper prices in July and August sparked buying activities. Also, the open arbitrage between Shanghai and London led to more cargos inflow,” said He Tianyu, a copper analyst at CRU Group