The Match Out: ASX rallies ahead of key US inflation data, Whitehaven (WHC) downgrades production

Another solid session for the market today with Tech & Resources doing the heavy lifting, the ASX200 is now up ~450pts/6.5% from the 20^th March low hitting a 5-week high, however, we get a major test tonight with US CPI Inflation data to be released, consensus expectations are for 5.1% YoY which would be the 9^th consecutive monthly decline from a 9.1% peak in June 2021.

• The ASX 200 finished up +34pts/ +0.47% at 7343
• The IT sector was best on ground (+1.44%) while Materials (+1.42%) ran a close second.
• Utilities (-0.41%) and Energy (-0.41%) the weakest links.
• Whitehaven Coal (ASX: WHC) -3.17% downgraded FY23 production guidance by around 5.5% with costs up a proportionate amount.
• NEXTDC (ASX: NXT) +8.09% rallied hard after saying that contracted utilization is up 43% this calendar year – worth noting that 7% of NXT is held short!
• Lithium stocks remain under pressure, Pilbara (ASX: PLS) -4.07% the weakest link following a negative note from Morgan Stanley.
• South32 (ASX: S32)+2.58% rallied on a broker upgrade from Goldman – a stock that’s been on our radar for some time.
• Sandfire (ASX: SFR) +1.49% continued to rally and it’s hard to stand in its way for now.
• Lead PM James Gerrish was on Ausbiz this morning discussing recent portfolio moves , amongst other things – Watch Here
• Iron Ore was ~0.50% higher in Asia supporting Fortescue (ASX: FMG) +1.62% and (ASX: RIO) +2.71%
• Gold was trading at US$2013 at our close – remains solid.
• Asian stocks were mixed Hong Kong down -0.66%, Japan +0.61% while China was up +0.42%
• US Futures are flat

ASX 200 Chart

Whitehaven Coal (ASX: WHC) $6.73

WHC -3.17%: hit today on a production downgrade, although the worst of it was seen early with the stock down ~7% at the lows. They said production would be lower than expected in the March quarter due to Labour shortages, and this has impacted FY23 guidance to the tune of 1Mt – or around 5.5% of total volumes. Lower product = higher costs which will increase by $5/Mt. Not good but not a disaster with the company saying the average coal price in the March quarter was $400/Mt (still benefitting from strong prices in 2H22), still a very nice margin even with revised cost guidance of $100-$107/Mt. They finished the quarter with net cash of $2.7b while there remains the strong possibility of higher energy prices in 2H23 as Europe rebuilds inventories ahead of winter.

NEXTDC (ASX: NXT) $12.02

NXT +8.09%: shares in the data centre operator briefly surged to 12-month highs today, closing at its best level in 6 months following a strong utilization update from the company this morning. Contracted utilization is up 43% this calendar year, adding 35.9MW to 120MW on the back of strong contract wins. The new S3 centre has been the main contributor with 46% of its planned capacity now contracted. On the back of strong customer support, NEXTDC has secured additional land for their planned S5 site which has a target capacity of 60MW. Revenue for their latest contract wins will be recognized from late FY24 and beyond.

Broker Moves

• Evolution Cut to Underperform at Macquarie; PT A$3
• Mineral Resources Raised to Buy at Citi; PT A$89
• Evolution Cut to Sell at CLSA; PT A$2.90
• SNG AU Rated New Speculative Buy at Morgans Financial Limited
• South32 Raised to Buy at Goldman
• Sims Raised to Buy at Goldman
• ioneer Raised to Speculative Buy at Canaccord
• Newcrest Cut to Reduce at CLSA; PT A$30
• Pilbara Minerals Rated New Underweight at Morgan Stanley
• PWR Holdings Rated New Buy at Citi

Have a great night

The Market Matters Team

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