ASX200 Afternoon Report May 24th 2022

The ASX200 has fallen by 9 points to be trading at 7140 at 3pm Sydney time.

A day that started with hope following a solid rebound on Wall Street has disappointed after investment banking heavyweights UBS and JP Morgan slashed their China 2022 growth forecasts due to China’s pursuit of Covid Zero.

Also weighing on fragile sentiment, a profit warning from social media company Snap that saw its share price tumble over 30% in after-hours trading, dragging the tech-heavy Nasdaq futures 1.4% lower to 11,867.

A move that has weighed on the local IT sector, led by Sezzle (SZL), which fell 7% to $0.53c. Afterpay owner Block (SQ2) fell 5.6% to $117.63, Zip (ZIP) fell 4.35% to $0.88c, Tyro Payments (TYR) fell 4.25% to $1.01, Seek (SEK) fell 2.8% to $24.49 and Life360 (360) fell 2.83% to $3.78.

Consumer-facing stocks remain under pressure despite a rebound in the ANZ consumer confidence index, which rose for the first time in five weeks. Aristocrat Leisure (ALL) fell 3.55% to $34.54, Flight Centre (FLT) fell 2.5% to $20.16. JB Hi-Fi (JBH) fell 1.7% to $45.80, Star Entertainment (SGR) fell 1.3% to $3.08, and Myer (MYR) fell 1.15% to $0.43c.

Losses also for the Industrial Sector. Downer Edi (DOW) fell 1.95% to $5.57, Seven Group Holdings (SVW) fell 1.75% to $18.40, Brambles (BXB) fell 1.54% to $11.16, and Qantas (QAN) fell 1.5% to $5.38 after taking a 51% stake in online travel business TripADeal.

The materials sector has lifted buoyed by prospects of another round of stimulus from Chinese authorities. Mineral Resources (MIN) added 3% to $61.44, Rio Tinto (Rio) added 1.4% to $110.99. Fortescue Metals (FMG) added 1.45% to $21.01, BHP Group (BHP) added 0.35% to $48.00.

Good gains also for the coal miners as natural gas prices exploded over 8% higher overnight. New Hope Coal (NHC) added 3.4% to $4.10. Yancoal (YAL) added 2.9% to $6.00, Coronado Global (CRN) added 2.2% to $2.32, Whitehaven Coal (WHC) added 1.36% to $5.22.

Gains also for the Energy sector as crude oil prices continue to trade near $110 p/b. Beach Energy (BPT) added 0.62% to $1.63. Woodside Petroleum (WPL) added 0.30% to $29.00, Santos (STO) added 0.25% to $8.20.

Positive comments overnight from U.S banking behemoth JP Morgan Chase have flowed through to the Finance sector today. National Australia Bank (NAB) lifted by 1.7% to $31.30, Westpac (WBC) added 0.9% to $23.62, Commonwealth Bank (CBA) added 0.75% to $105.28, ANZ added 0.7% to $25.48.

A mixed day for Lithium miners. Allkem (AKE) added 4.25% to $13.53, Pilbara Minerals (PLS) added 3.9% to $2.92, Galan Lithium (GLN) added 3.85% to $1.49 while Liontown Resources (LTR) added 3.3% to $1.34. Lake Resources (LKE) fell 2% to $1.48, and Vulcan (VUL) fell 0.8% to $7.45.

Over the past fortnight, the ASX200 has followed our road map to perfection. From our 7000/6950ish downside target, the rebound in the ASX200 last week reached our upside target at 7200. With the uncertainty of the election in the rear vision mirror, I expect to see the ASX200 embark on a relief rally towards 7300/50, providing Wall Street behaves itself in the interim.

Source Tradingview. The figures stated are as of May 24th, 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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