ASX200 Afternoon Report May 18th 2022


The ASX200 is trading 60 points higher at 7173 at 3.15 pm, looking to lock in a fourth straight day of gains after a wicked rebound on Wall Street overnight.

The rally on Wall Street came after robust retail sales data helped ease fears of a growth slowdown. Despite hawkish comments from Fed Chair Powell, who noted that inflation is the priority and that financial conditions have already "tightened quite a bit".

In recent weeks this type of hawkish Fed speak would have knocked the lights out of the market; however, after its sharp repricing lower, valuations now reflect an expectation that U.S yields will be in the 3.0-3.25% range by March 2023.

Shaking off news of fresh Covid-19 outbreaks around key Chinese cities, the Materials sector has helped drive the index higher.

South 32 (S32) added 5.26% to $4.71, Mineral Resources (MIN) added 2.5% to $60.66, Oz Minerals (OZL) added 3.5% to $22.80, Lynas Rare Earths (LYC) added 3.13% to $972. BHP Group (BHP) added 3.07% to $46.97, Rio Tinto (Rio) added 2% to $108.91. Fortescue Metals (FMG) added 1.70% to $19.72.

A strong rally in the Nasdaq overnight has helped the local IT sector higher. Seek (SEK) added 4.4% to $25.39, Life 360 (360) added 3.14% to $3.61, Megaport (MP1) added 2.56% to $7.23, Wisetech Global (WTC) added 2% to $41.21, Altium (ALU) added 1.9% to $28.10 and Afterpay owner Block (SQ2) added 1.94% to $117.50. BNPL stock Zip (ZIP) fell 1.9% to fresh cycle lows at $0.90c.

Consumer Discretionary stocks have climbed despite a tepid Q1 2022 Wages print which rose to 2.4% for the year, significantly below the inflation rate of 5.1%. Real wages - adjusted by headline inflation - are down 2.6% over the past year.

Flight Centre (FLT) added 4.55% to $21.16, Dominoes Pizzas (DMP) added 2.86% to $70.19, Webjet (WEB) added 1.95% to $5.76, and Harvey Norman (HVN) added 1% to $4.59.

The ASX200 Financial Sector has edged sideways. ANZ added 1.09% to $25.89, Macquarie (MQG) added 0.84% to $182.01. Westpac (WBC) added 0.1% to $24.48. Commonwealth Bank (CBA) added 0.05% to $105.17. National Australia Bank (NAB) fell by 0.57% to $31.30.  

The rebound in Lithium names has extended again today. Lake Resources (LKE) added 3.1 % to $1.51. Galan Lithium (GLN) added 3.5% to $1.48. Pilbara Minerals (PLS) added 2.4% to $2.80. Allkem (AKE) added 2.16% to $12.32. Iluka Resources (ILU) added 1.7% to $10.16.

Brambles (BXB) shares have bounced by 3.7% to $11.12 after CVC walked away from the pallet and distribution company yesterday.

Boral (BOR) has fallen by 3.12% to $3.11 after it warned of a $45m hit to FY22 earnings due to heavy rain in NSW and Queensland as well as rising energy costs.

Turning to the charts, after the ASX200 reached our 7000/6950ish downside target last week, we called for a recovery towards 7200. From broadly within the 7200/7300 region, we would ideally like to see one more leg lower towards range lows 6950/6750. But let's see what this weekend's Federal Election brings before making any new calls.

ASX200 Daily Chart 18th of May

Source Tradingview. The figures stated are as of May 18th, 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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