ASX 200 slumps as investors go risk off, falling iron ore and lithium prices tank stocks

Today in Review

Markets

The S&P/ASX 200 (XJO) finished 43.3 points lower at 7,670.3, 1.04% from its session low and 0.56% from its high. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 112 to 166. For the week, the XJO finished down 176.7 points or 2.3% lower. Ouch!

The Energy (XEJ) (+2.01%) sector was the best performing sector today, likely in response to a second solid day of gains for crude oil and natural gas.

Majors Woodside Energy Group (WDS) (+2.47%), Santos Ltd (STO) (+2.37%) and Karoon Energy Ltd (KAR) (+3.18%) added the most points to the sector, but there were good gains across the rest including beleaguered uranium stocks. The price of uranium nudged $US0.55/oz higher to US$83.65/oz – its first gain in 11 sessions.

Also doing well today was the Utilities (XUJ) (+1.03%) sector, but to be fair, there's a great deal of overlap between this sector and Energy. The Real Estate Investment Trusts (XPJ) (+0.77%) sector was the only other sector to log a gain.

Doing it tough today was the dum-dum-dummm…you guessed it…Resources (XJR) (-1.13%) sector. It’s was a tough week for Resources, down every day except Thursday for a 2.93% weekly decline.

Falls in nickel, lead, zinc, iron ore, gold, and lithium prices weren't enough to outweigh continued strength in the copper price. Most base metals stocks were lower, but Nickel Industries Ltd (NIC) (-5.59%), Alumina Ltd (AWC) (-3.18%), and Mineral Resources Ltd (MIN) (-2.69%) were notable losers.

In copper, Sandfire Resources (SFR) (-0.95%) dipped with its larger-cap peers, but smalls 29 Metals (29M) (+2.06%) and Aeris Resources (AIS) (-10.7%) pushed their gains into a second day.

Lithium was terrible. Lithium Carbonate futures on GFEX are roughly flat at the time of writing, but they were slammed yesterday in response to Pilbara Minerals' (PLS) BMX auction. Possibly a case of delayed reaction here, but lithium pricing is such a dynamic and murky topic at the moment – who knows!?

ChartWatch

US 10-Year Treasury Bond Yield

Bond yields impact the price of money, and the price of money impacts the price of all assets. The problem for stock investors this week is the price of money just got a little more expensive.

Yields on the benchmark US 10-year Treasury Bond rose for a fourth day on Thursday, for a four-day gain of 0.21%. The move from 4.08% to 4.29% doesn't sound like much, but when you consider the US Federal Reserve usually deals in 0.25% hikes or cuts, markets are being forced to digest the better part of a Fed rate hike this week.

A hike – not a cut as they were expecting.

Typically, when rates go in the opposite of market expectations like they have this week, risky assets like stocks, commodities, and crypto get sold off – i.e., exactly what's happened!

The rise in rates was triggered by consecutive worse than expected CPI and PPI data out in the States on Tuesday and Thursday respectively. The chart above suggests previous resistance to higher yields on the US 10-year T-Bond around 4.35%, but should it crack that level, 4.52% could be on the cards.

If this occurs, expect even more pain for risk assets.

Economy

Today

• There weren't any major data releases in our time zone today

Later this week

Friday

• 23:30 US Empire State Manufacturing Index (-7.6% forecast vs -2.4% previous)

Saturday

• 01:00 US Prelim UoM Consumer Sentiment (77.3 forecast vs 76.9 previous)

Latest News

The A to Z of ASX ETFs

Major shakeup on the ASX: 2024’s largest rebalance is underway

Is the RBA poised to be the last major central bank to cut interest rates?

Buy Hold Sell: Your top-tipped ETFs for 2024

Morning Wrap: ASX 200 to fall, S&P 500 tanks on hot producer prices, oil hits 4-month high

Evening Wrap: ASX 200 dips as copper stocks surge, Macquarie's big downgrade day smashes banks

Interesting Movers

Trading higher

• +11.5% EML Payments (EML) - EML Announces Sale of Sentenial Business, rise is consistent with prevailing short term uptrend, long term trend appears transitioning from down to up

• +7.7% K&S Corporation (KSC) - No news, rise is consistent with prevailing short and long term uptrends

• +7.5% Alpha HPA (A4N) - No news, closed back above long term trend ribbon

• +6.8% Bannerman Energy (BMN) - No news, small bounce in uranium price after 11 sessions without a rise, bounced off the long term uptrend ribbon

• +6.1% Strike Energy (STX) - No news, continued positive response to Tuesday's Walyering Production Update

• +5.4% Qualitas (QAL) - No news, rise is consistent with prevailing short and long term uptrends

• +5.0% Vulcan Steel (VSL) - Change of Director's Interest Notice showing ~$80k worth of on market purchases, bounced off short and long term trend ribbons

• +4.7% Telix Pharmaceuticals (TLX) - No news, rise is consistent with prevailing short and long term uptrends

• +4.3% Alkane Resources (ALK) - Kaiser Resource Drilling Records Highest Gold Grade Interval

• +4.1% Centuria Capital Group (CNI) - Continued positive response to Wednesday's Centuria raises $50m for counter-cyclical wholesale fund, rise is consistent with prevailing short term uptrend, long term trend appears transitioning from down to up

• +4.0% Zip Co (ZIP) - No news, rise is consistent with prevailing short and long term uptrends

• +3.5% Homeco Daily Needs REIT (HDN) - No news, generally stronger property sector today, rise is consistent with prevailing short term uptrend, long term trend appears transitioning from down to up

• +3.2% Karoon Energy (KAR) - No news, generally stronger energy sector today on rising crude oil and natural gas prices

Trading lower

• -19.9% Syrah Resources (SYR) - Completion of Placement and Institutional Entitlement Offer, fall is consistent with prevailing long term downtrend, rejected by long term downtrend ribbon

• -13.4% Fineos Corporation Holdings (FCL) - Ceasing to be a substantial holder notice from Selector Funds Management, fall is consistent with prevailing short and long term downtrends

• -10.1% Emerald Resources (EMR) - No news, general gold sector weakness today

• -9.6% Arafura Rare Earths (ARU) - No news, pullback after yesterday's 76% gain on Commonwealth Government supports Nolans with US$533m package

• -8.4% Liontown Resources (LTR) - Half Year Accounts, general lithium sector weakness today on second day of sharp falls in lithium futures prices, fall is consistent with previaling long term downtrend

• -7.8% SSR Mining (SSR) - No news, general gold sector weakness today, fall is consistent with prevailing short and long term downtrends

• -7.3% Arcadium Lithium (LTM) - General lithium sector weakness today on second day of sharp falls in lithium futures prices, fall is consistent with previaling short and long term downtrends

• -7.2% Westgold Resources (WGX) - No news, general gold sector weakness today

• -7.0% Sayona Mining (SYA) - General lithium sector weakness today on second day of sharp falls in lithium futures prices, fall is consistent with previaling short and long term downtrends

• -6.3% Chalice Mining (CHN) - Half Year Accounts - December 2023, general weakness in battery metals stocks, fall is consistent with previaling short and long term downtrends

• -6.2% Pilbara Minerals (PLS) - Possible continued negative response to yesterday's Pre-auction Sale, which to be fair probably sparked the 2-day sell off in lithium futures prices!

• -6.2% Regis Healthcare (REG) - Pullback after massive run since October, ex-div yesterday, so could be a case of divvy's in the bag…

• -5.6% Nickel Industries (NIC) - No news, falling nickel price on Thursday, general resources sector weakness

• -5.3% Core Lithium (CXO) - General lithium sector weakness today on second day of sharp falls in lithium futures prices, fall is consistent with previaling short and long term downtrends

• -5.2% Tabcorp Holdings (TAH) - MD and CEO to leave Tabcorp, fall is consistent with previaling short and long term downtrends

• -5.1% IGO (IGO) - General lithium sector weakness today on second day of sharp falls in lithium futures prices, fall is consistent with previaling short and long term downtrends

• -4.9% Block (SQ2) - No news 🤔

• -4.5% Adriatic Metals (ADT) - No news, general gold sector weakness today

• -4.4% Novonix (NVX) - No news, general weakness in battery metals stocks

• -4.3% Latin Resources (LRS) - General lithium sector weakness today on second day of sharp falls in lithium futures prices

Broker Notes

• Aussie Broadband (ABB) upgraded to buy from accumulate at Ord Minnett; Price Target: $4.16 from $4.89

• Aristocrat Leisure (ALL) downgraded to hold from add at Morgans; Price Target: $47.00 from $45.00

• ANZ Group (ANZ) retained at hold at Morgans; Price Target: $26.83 from $24.60

• Bega Cheese (BGA) retained at buy at Bell Potter; Price Target: $5.00

• Bellevue Gold (BGL) retained at outperform at Macquarie; Price Target: $1.90

• BHP Group (BHP) upgraded to buy from hold at Citi; Price Target: $46.00

• Brickworks (BKW) retained at Neutral at Macquarie; Price Target: $25.15

• Brambles (BXB) retained at overweight at Jarden; Price Target: $15.70

• Challenger (CGF) retained at hold at Ord Minnett; Price Target: $7.40

• Close The Loop (CLG) retained at buy at Shaw and Partners; Price Target: $0.70

• CSR (CSR) retained at Neutral at Macquarie; Price Target: $9.00

• Clinuvel Pharmaceuticals (CUV) upgraded to add from hold at Morgans; Price Target: $16.00

• Fortescue (FMG) upgraded to neutral from sell at Citi; Price Target: $24.00

• Goodman Group (GMG) retained at overweight at Morgan Stanley; Price Target: $34.00 from $31.35

• GWA Group (GWA) retained at Outperform at Macquarie; Price Target: $3.10

• Hartshead Resources (HHR) downgraded to hold from buy at Bell Potter; Price Target: $0.03 from $0.09

• Helloworld Travel (HLO) retained at buy at Shaw and Partners; Price Target: $3.80

• Insignia Financial (IFL) retained at accumulate at Ord Minnett; Price Target: $3.60

• James Hardie Industries (JHX)

  • Retained at buy at Citi; Price Target: $63.00

  • Retained at outperform at Macquarie; Price Target: $68.20

• Johns Lyng Group (JLG) retained at overweight at Morgan Stanley; Price Target: $7.20

• Liontown Resources (LTR) downgraded to underweight from neutral at Jarden; Price Target: $0.91

• McMillan Shakespeare (MMS) initiated at buy at Bell Potter; Price Target: $22.52

• Pilbara Minerals (PLS) retained at sell at Citi; Price Target: $3.60

• Perpetual (PPT) retained at hold at Ord Minnett; Price Target: $27.50

• Platinum Asset Management (PTM) retained at hold at Ord Minnett; Price Target: $1.25

• Reece (REH) retained at Underperform at Macquarie; Price Target: $19.40

• Rio Tinto (RIO) retained at buy at Citi; Price Target: $139.00

• Reliance Worldwide Corporation (RWC) retained at Outperform at Macquarie; Price Target: $6.10

• Serko (SKO) retained at buy at Citi; Price Target: $4.90

• Superloop (SLC) retained at add at Morgan Stanley; Price Target: $1.50 from $1.10

• Southern Cross Gold (SXG) initiated at hold at Bell Potter; Price Target: $2.05

• Woodside Energy Group (WDS) retained at neutral at Jarden; Price Target: $29.00

Scans

This article first appeared on Market Index on Friday 15 March.