Evening Wrap: ASX 200 dumps on nasty CPI print, 2024 rate cuts now impossible, but is a hike back on table?

Today's March quarter Consumer Price Index (CPI) data dominated proceedings. There's no way of sugar coating it, and if you did, it would probably cost you about 3.6% more for the sugar coating than it did last year – a bit more than the 3.4% p.a. the market was hoping for.

The release of the CPI data at 11:30am EST slashed around 0.5% off the benchmark S&P/ASX200 in just a few minutes, and as much as it tried, our market failed to recoup any of those losses by the close.

There was one thing which soared today, but it's opposite of what investors want to see. Yields on Australian 2-year government bond, a benchmark for the RBA's official cash rate in the near term, spiked 0.12% and closed above 4.4% for the fist time since early December last year.

Markets just pushed the first RBA rate cut well into 2025. On that sombre note...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 0.5 points lower at 7,683, 0.53% from its session high and just 0.04% from its high/low. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by to .

The Gold (XGD) (+1.1%) sub-index was the best performing sector today. Not much to report here, the sector got belted in the last two sessions and today is likely just a bounce as the gold price has stabilised (not bounced mind you...just stabilised!).

Gold stocks bounced back today

Financials (XFJ) (+0.35%), Consumer Staples (XSJ) (+0.29%), Energy (XEJ) (+0.18%) and Health Care (XHJ) (+0.02%) were the only major ASX sectors to close in the black today, and as you can see, not by a great deal.

The rest were varying degrees of lousy, with the honour of day’s lousiest sector going to Utilities (XUJ) (-0.59%), but Industrials (XNJ) (-0.55%) and Information Technology (XIJ) (-0.35%) weren’t too far behind.

I couldn't rationalise winners from losers today, it was all a bit jumbled as investors are trying to figure out how yet another extension to the first RBA rate cut is going to impact stocks. I expect the timing of the first cut is going to push from the current February 2025 as per the interbank cash rate futures implied yield curve, to March or April (full update Friday).

Australian 2 year Government Bond yield

To get a better idea of how much today's CPI print riled markets, see above the chart of the Australian 2 year Government Bond. It's a proxy for near term RBA intent. It spiked 12.4 basis points, or about half of a typical 0.25% interest rate move, to close above the current cash rate of 4.35%. It's the first time since December 4, 2023 the yield on the 2 year has closed above 4.40%. Scary stuff...🤯

ChartWatch

S&P/ASX 200 (XJO)

Overhead dynamic supply from short term uptrend is coming into play

Just a quick follow up on the XJO to point out that we encountered the dynamic supply that we expected to kick in around the short term uptrend ribbon today.

We had pegged the area between the short term uptrend ribbon and the historical point of demand (now acting as a point of supply) of 7741 as a key potential zone of excess supply. Today’s high was neatly within the range.

Excess supply manifested itself as an upward pointing shadow on today’s candle. The shadow and candle itself are both small by recent comparisons, and therefore I can only judge we’re dealing with a moderate amount of excess supply at this stage – encouraging.

Today’s price action does reinforce the need for caution, however, as the price action remains falling peaks and falling troughs. I also consider the magnitude of demand-side candles since the major top at 7911 as lesser than the magnitude of supply-side candles.

Supply is still in control of the short term price action.

Full white-bodied candles and/or downward pointing shadows are the fingerprints of excess demand. Watch for these to confirm we’re building towards a return to demand-side control.

A close above 7741 would go a long way to confirming this, as would a return to rising peaks and rising troughs.

Looking at the long term trend, demand at the long term uptrend ribbon is clearly super important going forward. 7492 is the key point of demand, and above it, the long term uptrend is intact.

Iron Ore 62% SGX

The old point of supply is acting as a point of demand

We’ve also been following iron ore on the Singapore Exchange (SGX) very closely since I pointed out in the Evening Update on 8 April the massive white demand-side candle which has proved to stamp out the major low at 95.40.

At last update, the iron ore price had pierced the zone of supply between 109.25 and 111.95. I suggested it may act as a zone of demand in the future. I also suggested the long term downtrend ribbon may act as an area of overhead supply.

Those hunches have turned out to be rather accurate. The price did pullback from the long term uptrend ribbon only to bounce strongly from just above 111.95 with the formation of today’s long white candle.

109.25-111.95 is now a key zone of demand. While iron ore continues to close above it, the short term rally is intact. I note the dynamic support zone of the short term uptrend ribbon is also catching up to coincide with this static demand zone – this should help reinforce it.

Should the iron ore price close above the long term trend ribbon, the next point of supply is 126.80. Watch the candles around there. White candles and/or downward pointing shadows would indicate there’s no actual supply in the system and set the price up for even higher retracements.

On the other hand, black candles and/or upward pointing shadows around 126.80 would indicate excess supply has indeed been encountered. In this case we could see a retracement back to the long term uptrend ribbon, which by then, will have transitioned to an area of dynamic demand.

Economy

Today

• AUS Consumer Price Index (CPI) March quarter

  • Headline: +1.0% March quarter (vs +0.8% q/q & +3.4% p.a. forecast & +0.6% & +3.4% p.a. in December)

  • Trimmed Mean: +1.0% March quarter (vs +0.8% q/q & +3.8% p.a. forecast & +0.8% q/q & +4.1% p.a. in December )

Wednesday

• 23:30 USA Core Durable Goods Orders March (+0.3% forecast vs +0.3% February)

Thursday

• All day AUS ANZAC Day Public Holiday (ASX non trading day)

• 22:30 USA Advance GDP March quarter (+2.5% p.a. forecast vs +3.4% p.a. December quarter)

Friday

• 00:00 USA Pending Home Sales March (+0.9% forecast vs +1.6% February)

• 12:00 (tentative) JPN Bank of Japan Policy Rate, Monetary Policy Statement, Outlook Report, Press Conference (forecast no change 0%-0.1%)

• 22:30 USA Core PCE Price Index March (+0.3% forecast & +2.7% p.a. vs +0.3% & 2.8% p.a. February)

Latest News

Interesting Movers

Trading higher

• +16.9% Immutep (IMM) - Positive preliminary topline results from TACTI-003 Cohort B

• +11.1% Base Resources (BSE) - Continued positive response to Monday's Proposed combination with Energy Fuels

• +6.3% Pointsbet Holdings (PBH) - Return of Capital

• +6.3% Tietto Minerals (TIE) - Notice that defeating conditions to takeover bid freed

• +5.1% Nuix (NXL) - No news, rise is consistent with prevailing long term uptrend, closed back above short term trend ribbon 🔎📈

• +4.8% Regis Resources (RRL) - Quarterly Activities Report, general gold sector strength today, rise is consistent with prevailing short and long term uptrends, bounced off short term uptrend 🔎📈

• +4.7% Winsome Resources (WR1) - Quarterly Activities/Appendix 5B Cash Flow Report, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +4.5% Fisher & Paykel Healthcare (FPH) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

Trading lower

• -27.5% Kogan.Com (KGN) - Kogan.com - April 2024 Business Update, closed below long term uptrend ribbon 🔎📉

• -12.4% Chrysos Corporation (C79) - Continued negative response to yesterday's Chrysos Quarterly Presentation Q3 FY24, several broker price target cuts and one rating downgrade, closed below long term uptrend ribbon 🔎📉

• -10.2% Droneshield (DRO) - Continued negative response to Monday's Completion of Upsized Underwritten $100m Placement

• -10.1% Chalice Mining (CHN) - Gonneville Resource Remodeled to Support Selective Mining, fall is consistent with prevailing long term downtrend, closed below short term uptrend ribbon 🔎📉

• -10.0% Cleanaway Waste Management (CWY) - Response to media speculation

Broker Notes

29METALS (29M)

• Retained at neutral at Barrenjoey; Price Target: $0.55 from $0.60

• Retained at neutral at Citi; Price Target: $0.45

• Downgraded to sell from underperform at CLSA; Price Target: $0.35 from $0.28

• Retained at hold at Jefferies; Price Target: $0.50

• Retained at underperform at Macquarie; Price Target: $0.26 from $0.25

• Retained at overweight at Morgan Stanley; Price Target: $0.55

AIC Mines (A1M)

• Retained at buy at Ord Minnett; Price Target: $0.25

Aurelia Metals (AMI)

• Upgraded to buy from hold at Jefferies; Price Target: $0.23 from $0.16

• Retained at outperform at Macquarie; Price Target: $0.22 from $0.23

ARB Corporation (ARB)

• Retained at accumulate at Ord Minnett; Price Target: $42.50

Accent Group (AX1)

• Initiated at overweight at JP Morgan; Price Target: $2.20

Boss Energy (BOE)

• Retained at buy at Bell Potter; Price Target: $6.35

Brambles (BXB)

• Retained at sell at Citi; Price Target: $14.25

• Retained at outperform at CLSA; Price Target: $16.60 from $16.80

• Retained at positive at E&P; Price Target: $16.85 from $17.20

• Retained at sell at Goldman Sachs; Price Target: $14.45

• Retained at overweight at Jarden; Price Target: $15.70

• Retained at underperform at Jefferies; Price Target: $13.14 from $13.22

• Retained at outperform at Macquarie; Price Target: $16.25

• Retained at equal-weight at Morgan Stanley; Price Target: $15.70

• Upgraded to hold from lighten at Ord Minnett; Price Target: $14.00

• Retained at buy at UBS; Price Target: $17.30 from $17.10

Chrysos Corporation (C79)

• Downgraded to neutral from overweight at Barrenjoey; Price Target: $7.25 from $8.05

• Retained at buy at Bell Potter; Price Target: $7.60 from $8.30

• Initiated at accumulate at Ord Minnett; Price Target: $7.55

• Retained at buy at Shaw and Partners; Price Target: $7.50 from $7.70

Core Lithium (CXO)

• Retained at sell at Goldman Sachs; Price Target: $0.12

Healthco Healthcare and Wellness REIT (HCW)

• Retained at equal-weight at Morgan Stanley; Price Target: $1.41

IGO (IGO)

• Retained at buy at Goldman Sachs; Price Target: $7.50

Ingenia Communities Group (INA)

• Retained at buy at Citi; Price Target: $5.30

Karoon Energy (KAR)

• Downgraded to equal-weight from overweight at Morgan Stanley; Price Target: $2.00 from $2.60

LGI (LGI)

• Retained at buy at Bell Potter; Price Target: $3.25 from $2.65

Lifestyle Communities (LIC)

• Retained at buy at Citi; Price Target: $17.90 from $20.00

• Retained at buy at Goldman Sachs; Price Target: $18.45 from $21.32

• Upgraded to accumulate from hold at Ord Minnett; Price Target: $15.80 from $16.90

• Upgraded to neutral from sell at UBS; Price Target: $12.85 from $14.24

Lovisa Holdings (LOV)

• Initiated at neutral at JP Morgan; Price Target: $29.00

Liontown Resources (LTR)

• Retained at neutral at Goldman Sachs; Price Target: $1.35

MA Financial Group (MAF)

• Retained at buy at Ord Minnett; Price Target: $7.00

• Retained at buy at UBS; Price Target: $5.70 from $5.60

Medadvisor (MDR)

• Retained at buy at Bell Potter; Price Target: $0.47 from $0.44

Mineral Resources (MIN)

• Retained at sell at Goldman Sachs; Price Target: $48.00

Matador Mining (MZZ)

• Retained at buy at Shaw and Partners; Price Target: $0.19

Northern Star Resources (NST)

• Retained at neutral at Citi; Price Target: $14.50

• Retained at neutral at Goldman Sachs; Price Target: $14.50 from $14.60

• Retained at outperform at Macquarie; Price Target: $17.00

• Retained at equal-weight at Morgan Stanley; Price Target: $13.55

• Retained at accumulate at Ord Minnett; Price Target: $15.60 from $15.70

• Retained at neutral at UBS; Price Target: $15.00 from $15.20

Pilbara Minerals (PLS)

• Retained at sell at Goldman Sachs; Price Target: $2.80

Select Harvests (SHV)

• Retained at hold at Bell Potter; Price Target: $4.10 from $4.70

• Retained at buy at Ord Minnett; Price Target: $5.25 from $5.41

• Retained at buy at UBS; Price Target: $4.70 from $5.10

Stanmore Resources (SMR)

• Retained at buy at Ord Minnett; Price Target: $3.90 from $3.80

Strike Energy (STX)

• Retained at buy at Bell Potter; Price Target: $0.29 from $0.32

Treasury Wine Estates (TWE)

• Retained at overweight at Morgan Stanley; Price Target: $14.50 from $13.75

Universal Store Holdings (UNI)

• Initiated at overweight at JP Morgan; Price Target: $6.20

Scans