Evening Wrap: It's Bear Season! ASX 200 swept higher in growing global risk-on move

It was an extremely broad-based move higher in Australian equities today as all major sectors advanced. Local stocks cheered weaker than expected growth data as it hinted further rate hikes from the RBA are unlikely. It was a case of all ships catching the rising tide as stocks across the region also rallied strongly in a growing global risk-on move.

Let's dive in.

Markets

ASX 200 Session Chart

Aussie investors were buying a stairway to heaven today!

The S&P/ASX200 (XJO) finished 116.8 points higher at 7,178.4, 1.65% from its session low and just 0.22% from its high. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by a whopping 225 to 28.

S&P/ASX 200 technicals got a big boost from today's candle

Large white candles on broad-based moves such as these (all major sectors up and 225/28 advance/decline) are strong votes of confidence in the local market. The demand side was nearly unanimous in its support for stocks, and supply ran for the hills.

The timing of this move, i.e., at a seasonally strong time of the year, potentially bodes well for further gains. 7,320-7,362 appears to be the next logical target based upon key historical excess supply points, while 6,985-7,041 now moves to support.

Real estate stocks love lower long term rates

The S&P/ASX 200 Real Estate Investment Trusts (XPJ) was the strongest sector today, once again enjoying lower long term bond yields overnight. This sector had the most to lose when interest rates were soaring, so it could be considered as having the most to gain now rates are paring back.

S&P/ASX 200 technicals got a big boost from today's candle

Communication Services (XTJ) +2.1%, Consumer Staples (XSJ) +2.1%, and Consumer Discretionary (XDJ) +2% sectors were next best sectors - each also a big winner from lower rates.

The only notable loser was the S&P/ASX All Ordinaries Gold Sub-Index (XGD) which gave back 1.6% of its recent strong gains as the spot gold price pulled back from recent all-time highs.

Economy

The Australian economy expanded just 0.2 per cent in the September quarter, slower than the 0.4% it grew in the June quarter, and below economists’ forecasts for 0.4% growth. Annual growth held steady at 2.1% due to upward revisions in data from the end of 2022.

Source: Forex Factory

Not only was the data weak and weaker than expected, after accounting for population growth over the period, Australian economic activity actually shrank 0.5% on a per capita basis. When you consider the Australian economy also shrank 0.1% on this basis in June, it's not hard to argue we're in a recession.

What to watch out for...

ADP Non-Farm Employment Change is the private sector precursor to the official labor figures released by the USA Bureau of Labor Statistics BLS in the USA on Friday. It drops at 12:15am AEDT and is expected to show 131,000 jobs were created in the American economy in November, up from October's 113,000 jobs.

Latest News

SOL bids for Perpetual

Great minds think alike, or is Washington H. Soul Pattinson (ASX: SOL) just ahead of the curve? Today, Perpetual (ASX: PPT) told the market it was thinking about a demerger of its asset management unit from its wealth and corporate trust business in order to create as much as $1 billion extra value for shareholders.

Then, after market, SOL lobbed in a $3 billion bid for the whole Perpetual business with a view to, you guessed it, splitting and retaining the wealth and trust unit and hiving off the rest into an independent structure which would be owned by existing Perpetual shareholders.

Washington H Soul Pattinson is Perpetual's largest shareholder, with a 9.9% of the business.

Chemist Warehouse to list on ASX via reverse takeover of Sigma Healthcare

That's just jargon for the smaller Sigma Healthcare (ASX: SIG) taking over the bigger Chemist Warehouse so the latter can become a publicly traded company without going through the process of listing on the ASX itself.

The deal makes plenty of sense considering Sigma is the wholesale distributor for Chemist Warehouse's pharmaceuticals products and given Chemist Warehouse already owns a 10 per cent stake in Sigma. Home Consortium (ASX: HMC) also got a boost today as it owns 19 per cent of the small group.

Chemist Warehouse is big business, and the co-founders who are the major shareholders in the business, raked in around $365 million in dividends in FY23. This deal gives them a chance to potentially liquidate some of their holdings, but it also provides Sigma with vital working capital.

Interesting Movers

Trading higher

• +17.4% Core Lithium (CXO) - No news, rally in several lithium companies despite sharply lower lithium minerals prices again today

• +14.9% HMC Capital (HMC) - Major shareholder in Sigma Healthcare which is being reverse acquired by Chemist Warehouse

• +13.0% Polynovo (PNV) - First $A8M sales month and $A9M revenue month

• +11.8% Latin Resources (LRS) - No news, rally in several lithium companies despite sharply lower lithium minerals prices again today

• +11.3% Weebit Nano (WBT) - No news

• +10.8% Chalice Mining (CHN) - Key Access Approvals Received at Julimar Exploration Project

• +8.5% EVT (EVT) - No news

• +7.3% Beacon Lighting Group (BLX) - No news

• +7.2% Lifestyle Communities (LIC) - No news, stronger property sector on falling long term bond yields

• +6.9% Link Administration Holdings (LNK) - No news

• +6.8% Alumina (AWC) - No news since 4 Nov Becoming a substantial holder

• +6.3% Zimplats Holdings (ZIM) - No news

• +6.3% Perpetual (PPT) - SOL: Non-binding indicative proposal to acquire Perpetual

• +6.1% Liontown Resources (LTR) - No news, rally in several lithium companies despite sharply lower lithium minerals prices again today

• +5.7% Sayona Mining (SYA) - No news, rally in several lithium companies despite sharply lower lithium minerals prices again today

• +5.6% Pilbara Minerals (PLS) - No news, rally in several lithium companies despite sharply lower lithium minerals prices again today

Trading lower

• -13.0% Evolution Mining (EVN) - Completion of A$525 million Institutional Placement

• -7.4% Life360 Inc (360) - SEC Form 4

• -5.4% Macmahon Holdings (MAH) - No news

• -4.2% Fineos Corporation Holdings PLC (FCL) - No news since 05-Dec Chair's Address to Shareholders

• -3.7% Alkane Resources (ALK) - No news, gold sector pullback

• -3.4% Regal Partners (RPL) - No news

• -3.3% Lotus Resources (LOT) - No news

• -3.3% Alpha HPA (A4N) - No news

• -3.2% Nuix (NXL) - No news

Broker Notes

• ARB Corporation (ARB) retained at buy Ord Minnett; Price Target: $36.00

• Arafura Rare Earths (ARU) retained at buy Bell Potter; Price Target: $0.44 from $0.65

• Centuria Office Reit (COF) retained at underweight Morgan Stanley; Price Target: $1.26 from $1.30

• Cygnus Metals (CYC) retained at buy Bell Potter; Price Target: $4.25

• Dexus (DXS) retained at underperforrm Morgan Stanley; Price Target: $7.65 from $8.10

• Evolution Mining (EVN)

  • Upgraded to buy from underperform at CLSA; Price Target: $4.35

  • Retained at overweight Morgan Stanley; Price Target: $4.25

• Graincorp (GNC)

  • Retained at buy Bell Potter; Price Target: $9.55

  • Retained at outperform Macquarie; Price Target: $9.70

• Hartshead Resources (HHR) retained at buy Bell Potter; Price Target: $0.09 from $0.07

• Metcash (MTS)

  • Retained at buy UBS; Price Target: $4.25

  • Retained at neutral Citi; Price Target: $4.00

• NIB Holdings (NHF) upgraded to overweight from neutral at JPMorgan; Price Target: $8.60 from $8.30

• Qantas Airways (QAN) retained at buy UBS; Price Target: $7.70 from $8.00

• Scentre Group (SCG) retained at overweight Morgan Stanley; Price Target: $3.10

• Star Entertainment Group (SGR) upgraded from neutral to overweight at Barrenjoey; Price Target: $0.70 from $1.33

• Qantas Airways (QAN) upgraded to buy from neutral at UBS; Price Target: $5.20

Scans