ASX200 Afternoon Report May 4th 2022

The ASX200 is trading 6 points lower at 7311, 50 points below its intraday high, as the Materials Sector gave up early gains and reversed lower mid-morning. (Prices below as of 3pm Sydney time)

China's damaging Covid lockdown creates a massive amount of short-term uncertainty around commodity prices and for the ASX200 Materials sector, now 10% below its April highs.

Once the latest outbreak is under control, Chinese authorities will unleash another round of stimulus on their slowing economy. Until then, it's a shoot first, ask questions later type market for commodity-related ASX200 stocks.

Mineral Resources (MIN) fell 3% to $54.35, Fortescue Metals (FMG) fell 2.7% to $20.05, BHP Group (BHP) fell 0.59% to $47.38, while Rio Tinto (Rio) fell 0.76% to $110.99.

Following the RBA's first interest rate hike in 12 years yesterday, the big banks have wasted little time passing on rate hikes to mortgage holders, a move that has weighed on Consumer Discretionary stocks.

JB Hi-Fi (JBH) has fallen by 4.16% to $50.05 as the company elected not to provide FY22 guidance due to local and global uncertainties; Domino's Pizza (DMP) fell 2.57% to $67.42, Harvey Norman (HVN) fell 0.6% to $4.96. Nick Scali has fallen 0.7% to $9.96 after the company cited increased "freight costs" on sales.

After a stomach-churning 10% fall in April, it's been another tough day for local IT stock as traders assume the brace position ahead of tomorrow morning's FOMC meeting. The market is fully priced for a 50bp hike tomorrow before 50 bp hikes in June, July, and September.

ZIP (ZIP) fell 11.26% to $1.02 after the company announced this morning, they are releasing a large volume of shares from an escrow account over the coming weeks. Life 360 (360) fell 5.17% to $3.67, Tyro Payments (TYR) fell 4.58% to $1.15. Megaport (MP1) fell by 4.37% to $8.09. EML Payments (EML) fell by 4.11% to $1.61. Appen (APX) and Afterpay owner Block (SQ2) fell by more than 3%.

Travel stocks have given back a good chunk of their gains from earlier in the week as Flight Centre (FLT) said its operations are being hindered by a lack of airline carrier service and staff. Flight Centre (FLT) fell 6.64% to $21.26, Corporate Travel (CTD) fell 2.72% to $24.28, Webjet (WEB) fell 2% to %5.88 and Qantas (QAN) fell 1.21% to $5.72.

Crude oil is holding above $103.00 as the market continues to juggle the impact of China lockdowns, the likelihood of a complete European embargo on Russian oil and the outcome of tomorrow night's OPEC+ meeting, which will see members greenlight a modest 432k bpd oil output increase for June. Not enough to ease a structurally undersupplied market.

Beach Energy (BPT) added 1.23% to $1.65, Santos (STO) added 1.19% to $8.08. Origin Energy (ORG) added 0.36% to $6.94. Woodside Energy (WPL) added 0.2% to $31.25.

In a trading update a surge in ANZ half-year profits has supported the Financial sector. Commonwealth Bank (CBA) added 0.67% to $103.00, National Australia Bank (NAB) added 1.09% to $32.45. ANZ added 0.77% to $27.47, Westpac (WBC) added 0.63% to $24.05. Macquarie added 1.26% to $206.01.

Stocks in the Lithium space remain under pressure, led by AVZ Minerals which provided a disappointing update on its African exploration project, falling 18.69% to .81c. Vulcan Energy (VUL) fell 5.9% to $7.66, Lake Resources (LKE) fell 4.87% to $1.66. Core Lithium (CXO) fell 3.95% to $1.22 and Liontown (LTR) resources fell 3.2% to $1.37.

With the ASX200 continuing to rotate either side of the 200-day moving average at 7350, we remain neutral on the local bourse. A break/close below uptrend support and recent lows 7230ish would warn that a deeper correction is underway. While a break/close above 7450 is needed for the ASX200 to set up a fourth run at the herculean resistance at 7620/7640.

The AUDUSD is trading higher at .7114, supported by March retail sales that rose by a stronger than expected 1.6%, yesterday's 25bp RBA rate hike and some gentle squaring up of AUDUSD shorts ahead of tomorrow morning's FOMC meeting.

Source Tradingview. The figures stated are as of May 4th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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