The ASX 200 closed up 20 points to 7113 (+0.3%) in cautious trade after RBA minutes sapped some buying. News that Shanghai is beginning to reopen was good for Asian markets and resources with BHP leading iron ore stocks higher up by 0.6%. FMG rallied 2.3% and lithium stocks back in demand with AKE up 5.5% and PLS rising 5.0%. Base metals were also good with S32 up 1.6% and IGO making a move 2.7% higher. Energy stocks in demand as oil prices remain elevated, STO up 2.0% and WPL up 2.0% with KAR up 3.7%. Banks were firm again as bond yields rose to 3.44%. The Big Bank Basket was up 1.1% at $186.67. CBA up 1.7% and NAB doing well up 0.5%. MQG bounced too today up 0.5% with insurers solid. Healthcare was in the casualty ward today with CSL down 1.2% leading RHC down 1.5% and RMD off 2.6%. Industrials were mixed and uninspiring, GMG fell 4.1% after some broker downgrades, ALL slipped 1.4%, SEK down 4.3% and REA off 4.5%. Defensives did ok with WOW and COL up. Tech was mixed with CPU up 1.6% and XRO off 1.6%, and WTC down 1.7% with the All Tech Index down 1.4%. In corporate news, BXB slid 7.6% after CVC walked off into the sunset due to market volatility, OFX rose another 8.9% on a profit update, and CRR ran 19.2% on some promising spodumene shows. IHL rallied 11.0% on a positive FDA meeting. In economic news, the lection continues to sap consumer confidence and RBA minutes showed the board toyed with a bigger 40bps rise in rates. Asian markets firmed with Japan up 0.2% and HK soaring 2.9% with China up 0.5%. Signs that the tech crackdown is over from Beijing.

End of Day Podcast – Tuesday, May 17

Major Movers:

  • Winners: IHL, CXO, INR, OFX, STX, LYC, BPT, RED, WHC
  • Positive sectors: Resources. Oil and Gas. Banks.
  • Negative sectors: Healthcare. ‘Old skool’ platforms. Tech.
  • High 6963 Low 6931. Tight range. Waiting.
  • Big Bank Basket: Up to $186.67(1.1%)
  • All-Tech index: Down 1.3%
  • Gold: Slips to $2608
  • Bitcoin: Steady at US$30316.
  • Aussie Dollar: Back to 70c.
  • 10-Year Yield rally to 3.42% on minutes.
  • Asian markets firmed with Japan up 0.2% and HK soaring 2.9% with China up 0.5%.
  • US Futures: Dow up 4. Nasdaq up 83

Stocks on the Move

  • OFX +8.87% profit update.
  • RED +6.06% resumes rally.
  • CXO +9.28% Lithium back in demand.
  • LYC +6.56% risk appetite returning.
  • MIN +5.71% iron ore and lithium bounce.
  • AKE +5.51% bargain hunters.
  • CRR +19.18% 23.1m of visual spodumene-bearing pegmatite intersected.
  • BUB +16.22% infant formula bounce maybe.
  • G6M +10.42% King Island mine still attracting buyers.
  • STP +38.10% undies up today after a serious plunge yesterday.
  • GAL -7.60% profit-taking.
  • SZL -8.70% US SEC form 10-Q
  • ASM -12.70% profit-taking.
  • BXB -7.59% CVC walks on market volatility.
  • PBH -4.60% ceasing to be a substantial shareholder.
  • MFG -4.40% PR exercise saying stability has returned with new CEO.
  • ZIP -3.16% coming undone.
  • Speculative stock of the Day:  Havilah Resources (HAV) +84.85% OZL acquires an option to acquire Kalkaroo copper project in SA.

In the News

  • James Hardie Industries (JHX) – Q4 adjusted net income of US$177.5m vs consensus of US$184.0m. Reaffirmed guidance of net income US$740m-820m vs consensus of US$773.2m. Declared an interim dividend of US$30c. James Hardie Industries will push through a fresh round of price rises in its big North American business on June 20. This will take total price increases to 9%
  • United Malt Group (UMG) – First half NPAT $10.3m vs consensus $25.9m.
  • A2 Milk Co (A2M) CFO Race Strauss to step down, with David Muscat appointed as his replacement.
  • Havilah Resources (HAV) have rocketed after it signed a binding term sheet with OZL to potentially sell its Kalkaroo copper-gold project for $205m.
  • IGO has won support for its WSA bid from a high-profile proxy adviser. The improved price was still below the 404c to 523c range that KPMG declared to be fair value in the “independent expert”.
  • Commonwealth Bank (CBA) has launched nationally its new digital home loan, Unloan, which provides a single low-cost interest rate. Owner-occupiers who refinance to Unloan will pay an interest rate of 2.14% and investors 2.44%.
  • Nickel Mines (NIC) has signed a binding term sheet for the implementation of a 220MW solar project.
  • Pilbara Minerals (PLS), with its project partner Calix (CXL), has been awarded a $20m grant from the Australian government under the modern manufacturing initiative.
  • OFX Group (OFX) has forecast net operating income or NOI for financial 2023 of $200m to $212m, and underlying EBITDA of $55m to $60m.

Economic News/Bond Markets

  • Consumer confidence dropped 1.3% last week to its lowest level since mid-August 2020, according to an ANZ-Roy Morgan survey. It has now fallen for three consecutive weeks. Respondents’ confidence in ‘paying off their home loan’ dropped 0.6%, falling a cumulative 14.7% in the past three weeks.
  • RBA minutes reveal a 40bp hike was considered. Three options were mooted a 15bp, 25bp or 40bp hike. The RBA concluded that a 25bp move would signal a return to more typical policy settings. JP Morgan said the minutes add weight to the expectation of more 25bp hikes.
  • “Members agreed that raising the cash rate by 15bp was not the preferred option given that policy was very stimulatory and that it was highly probable that further rate rises would be required. A 15bp increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25bp.”
  • ANZ has cut its outlook for housing price growth, reversing the optimism it showed earlier in the year, saying faster-than-expected rate rises will lead to dwelling prices falling by 3% this year and a further 8% next year.

Asian Markets

  • JP Morgan turns positive on Chinese tech only a month or so after saying it was ‘uninvestable’.
  • Japan to allow small groups of tourists in later this month.
  • Thailand has cut full-year growth estimates by 1% to 2.5%-3.5%. The inflation forecast raised to 4.2%-5.2% amid supply disruptions.
  • Chinese economic activity has collapsed on Xi’s zero-tolerance CV19 policy.
  • As Shanghai takes tentative steps to reopen, in the northern port city of Tianjin, a new flareup has emerged, likely set off by an infection from a worker at a cold storage facility. The city of nearly 14m detected 28 infections during a mass testing drive. Shanghai aims to return to normal life and restore full production by mid-to-late June.

US and European Headlines

  • European stocks are expected to open higher on Tuesday. FTSE showing up 28 and DAX up 100.
  • U.K. unemployment figures for March and the second estimate of the euro area growth rate for the first quarter.
  • UK March average weekly earnings up 7% 3m Y/Y v 5.4% in February. Inflationary pressures building.
  • Buffet has bought a $3bn stake in Citi as he goes shopping for value in US sell-off.
  • FDA Relaxes Import Rules for Baby Formula to Boost Supplies.
  • JetBlue is appealing directly to Spirit Airlines’ shareholders by launching a tender offer for their shares, after Spirit rejected JetBlue’s US$3.6bn offer in favour of an existing deal with Frontier Airlines.
  • Jeff Bezos is attacking the Biden for its handling of inflation. Ben Bernanke says Fed was too slow and talks up ‘stagflation’.

And finally….