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ASX200 Afternoon Report June 21st 2022

June 21, 2022 6:17 AM

The ASX200 is trading 94 points higher at 6527 at 3pm Sydney time and is set to snap a seven-session losing streak that has wiped over $200 billion off the local index.

The rally on the ASX200 follows a long weekend in the U.S, which has acted as a circuit breaker of sorts, allowing investors to regroup and take stock after U.S equity markets plunged 10% over the past two weeks.  

Also supporting, a speech today by RBA Governor Phillip Lowe, who pushed back on the interest rate markets aggressive pricing of RBA rate hikes and noted it would be unlikely that the cash rate gets anywhere near the 4% the market is currently pricing.

Finally, after a horrific run, the market will start to look at potential rebalancing flows for end of month, end of the quarter and end of financial year, which I would expect to be supportive of stock markets at the expense of fixed income.

Reversing a run of heavy falls, the Energy and the Materials Sectors have been the best on the ground today, supported by a rally in iron ore, coal and crude oil futures prices during the Asian time zone.

Beach Energy (BPT) added 3.87% to $1.61. Woodside (WDS) lifted by 3.97% to $31.57, Origin Energy (ORG) added 2.6% to $5.59, and Santos (STO) added 2.53% to $7.51.

Coal miner, Yancoal (YAL) added 6.36% to $5.35, Whitehaven Coal (WHC) added 4.19% to $4.73, New Hope Coal added 3.75% to $3.33 while Coronado Coal (CRN) added 0.91% to $1.66

Iron Ore heavy weight Fortescue Metals (FMG) added 2.53%% to $17.44, Rio Tinto (RIO) added 2.52% to $104.17, BHP Group (BHP) added 2.55% to $41.72. Elsewhere South32 (S32) added 2.46% to $4.16 while Lynas (LYC) added 4.17% to $8.74.

A rebound also for the financial stock’s supported by lower yields as the Aussie front end cratered following the more dovish tones from the RBA Governor this morning.

National Australia Bank (NAB) added 3.18% to $26.88. ANZ added 2.52% to $21.93, Westpac (WBC) added 2.34% to $19.64, Commonwealth Bank (CBA) added 1.84% to $89.16, and Macquarie (MQG) added 1.7% to $164.33.

A mixed session for the IT sector. Novonix (NVX) added 6.6% to $2.50, Life 360 (360) added 5.8% to $2.75, Afterpay owner Block (SQ2) added 2% to $86.01. Elsewhere, Megaport (MP1) fell 4% to $5.08, more pain for BNPL stock ZIP (ZIP) as it fell 0.94% to $0.53 and Wisetech Global (WTC) fell 0.9% to $35.77.

The roller-coaster ride in the Lithium space continues. Lake Resources (LKE) plunged 21% to $1.07; Core Lithium (CXO) fell 5.6% to $1.02. Elsewhere, Pilbara Minerals (PLS) added 3.43% to $2.11, Allkem (AKE) added 3% to $10.09, and Iluka Resources (ILU) added 2.75% to $8.97.

Until last week, the ASX200 appeared to be tracing out an orderly correction - trading just 10% below its all-time highs and within a well-defined nine-month range between 7630 and 6750ish. However, the decisive break from the bottom of the range 6850/6750 early last week created significant technical damage to the index.

The ASX200 must rebound above 6750/6850ish to restore some much-needed confidence in the market. Otherwise, the risks are for the ASX200 to continue lower towards 6000 with scope to 5750 once the expected end of month rally is complete. 

Source Tradingview. The figures stated are as of June 21st, 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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