ASX200 Afternoon Report May 30th 2022

The ASX200 has added 104 points today to close at 7286.6.

The rally comes after Wall Street closed 6.6% higher last week, snapping a seven-week losing streak on investor optimism that markets have passed peak Federal Reserve hawkishness.

Behind the bout of optimism, soft economic data. Of the last 19 major economic releases in the U.S, 13 have missed economists’ expectations causing rate hike expectations to ease.

After spending last week suppressed below 7200, the ASX200 has traded to its highest level in three weeks, led by the interest rate sensitive IT Sector. Novonix (NVX) added ~11% to $4.14, Zip (ZIP) added 14% to $0.97c, Afterpay owner Block (SQ2) added 11% to $129.85, Sezzle added 10.6% to $0.58c, Tyro Payments (TYR) added 10.2% to $1.14 and Megaport (MP1) added 8.57% to $7.73..

A rebound in commodity prices courtesy of another round of China stimulus announcements and relaxation in lockdown restrictions has given the big miners a big boost. Oz minerals (OZL) added 3.5% to $23.95, South 32 (S32) added 3.6% to $4.88, BHP Group (BHP) added 2.84% to $44.91. Fortescue Metals (FMG) added 1.33% to $19.85, and Rio Tinto (Rio) added 0.4% to $113.80.

A huge day for the Consumer Staples Sector after the FDA said it had struck a deal with infant formula make Bubs Australia (BUB) to ship its products to the U.S to ease a shortage. The share price of BUBS soared over 75%, trading to a high of $0.86c before settling back at $0.68c. A2 Milk (A2m) lifted 10.4% to $4.77, riding the coattails of its rival BUBS higher. Elsewhere Woolworths (WOW) added 2.2% to $34.93, Bega Cheese (BGA) added 2.5% to $4.81, and Blackmores (BKL) added 2.3% to $72.61.

A good day for the bank stocks as Macquarie added 2.8% to $188.12, Bank of Queensland added 1.72% to $7.70. Westpac (WBC) added 0.54% to $24.22, National Australia Bank (NAB) added 0.54% to $31.85, Commonwealth Bank (CBA) fell 0.07% to $106.56.

Some energy companies have benefitted from the price of crude oil lifting to a two-month high, above $116 p/b, on concerns over tight supply ahead of the start of the U.S driving season this week and as China begins to ease its stifling lockdowns. Strike Energy (STX) added 3.4% to $0.31c, Woodside Energy (WDS) added 0.3% to $30.23, Origin Energy (ORG) fell 0.30% to $6.82. AGL Energy (AGL) fell 1.69% to $8.72 after abandoning its demerger plans.

A strong session for Lithium miners as Galan Lithium (GLN) added 7.75% to $1.53. Vulcan Energy (VUL) added 5.32% to $7.92, Core Lithium (CX0) added 5.36% to $1.38. Liontown Resources (LTR) added 5.3% to $1.39 after the company and Tesla extended the termination date of their offtake agreement which will see Liontown supply the EV company with 150,000 dry metric tonnes of spodumene concentrate per annum.

Providing the ASX200 can hold above support (formerly resistance) at 7200, the ASX200 has negated the short-term downside risks and, supported by month-end flows, looks set to test the 200 day moving average at 7320.

Source Tradingview. The figures stated are as of May 30th, 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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