Evening Wrap: ASX 200 stumbles on CPI shocker, finally something for lithium investors to cheer, but gold, uranium stocks tank

I know, I know.

I jinxed it yesterday. 🤦‍♂️

I got all excited and I mentioned the "record" word. As in, we were only 72 points away from making a new one.

Add another 55.

Sorry. It won't happen again.

What happened today?

• Worse than expected CPI (inflation) data.

• Good news for lithium investors, prices in China are bouncing

• Bad news for gold and uranium investors (prices of those two are falling)

For these bullet points and everything else...

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 55.8 points lower at 7,783, 0.42% from its session low and just 0.72% from its high. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 78 to 201 (pretty much the opposite to yesterday 😭!).

Just three of the eleven major ASX sectors managed to scrape into the black today, and to be fair that’s better than I thought it would be before I pulled up the numbers.

Information Technology (XIJ) (+0.78%), Energy (XEJ) (+0.53%), and Utilities (XUJ) (+0.25%) were the triumphant trio, a bit of a hodgepodge in terms of themes, though.

Solid gains in sector heavyweights Wisetech Global (ASX: WTC), Xero (ASX: XRO), and Codan (ASX: CDA) drove Tech, likely following the strong lead from the Nasdaq Composite last night. But there did appear to be some bargain hunting in beaten down tax loss selling victims like Brainchip (ASX: BRN), Appen (ASX: APX), and Weebit Nano (ASX: WBT).

The best of the Tech sector today

It was a similar case in Energy – with traditional carbon-based sector heavyweights leading the way. Uranium was a notable casualty as the uranium price, and sentiment towards the sector, continue to ebb.

A mixed bag in the Energy sector

The other notable sub-sector of the market today was lithium. A modest bounce, but a bounce nonetheless. If you've been following my posts on X/Twitter you'd be all over the sharp turnaround in a key lithium futures contract in China. That rally continued today and it's got lithium bulls all in a flutter! 🥳

November lithium carbonate futures got lithium bulls in a flutter today...

The best of the ASX lithium sector today

Doing it tough today was the Gold (XGD) (-3%) sub-index. It's suffering from a continuation of the recently established short term downtrends in gold and silver futures prices. If you've been following ChartWatch, you're all over these moves.

A tough day for the ASX gold sector today

ChartWatch

Australian 2-year Government Bond Yield

Ouch. Usually long white candles are a good thing!

If you've been suffering through my ChartWatch updates in these Evening Wraps for any length of time, you've probably become brainwashed into thinking long white candles that close at or very near their highs are a good thing, right?

Well, if you prefer something to go up and not down – then yes, this is definitely the case. Long white candles are the epitome of demand-side control. Lots of demand, very little supply, and this excess demand was sustained all the way into the close.

The only thing that stopped buyers from grabbing more from receding sellers was…ding ding ding ding ding…the closing bell rang.

There’s every chance that when trading resumes the next session (all things being equal) those buyers will simply pick up where they left off.

The big white candle in the above chart is a good thing only if you want Australian interest rates to go up. And maybe you do (I see you boomers sitting on piles cash in the bank! 💰).

But for most, that big white candle spells bad news – it means higher mortgage rates, and should that knock on to lower consumer spending and higher company borrowing rates – lower company profits, and therefore lower stock prices.

Sure, it’s big and it’s white, but let’s put that last candle into perspective.

Yesterday the yield on the 2-year Australian Government Bond closed at 4.024%. Today its trading at 4.208%. (I should mention here that the Aussie 2-year is the benchmark for short term market rates in Australia).

Doing the math...That's a +0.184% increase – which is the better part of a typical RBA interest rate hike.

The long standing notion that the RBA was done with hikes, that the next move in Australian interest rates would be down, took a very big knock today!

High Grade Copper (Front-month, back-adjusted) COMEX

A date with the long term uptrend ribbon likely awaits high grade copper.

The last time we covered high grade copper was in ChartWatch in the Evening Wrap on 13 June.

In that update, we noted that the situation for copper had become “materially worse” and that the new short term downtrend would likely yield “more of the same”.

Since then, it’s been a series of falling peaks and falling troughs, predominantly supply side candles (i.e., black-bodied and or upward pointing shadows), and of the short term trend ribbon offering stiff upside resistance (i.e., dynamic supply).

The 4.40 and 4.396 points of demand have been cracked and so was the subsequent 4.375.

If we don’t see a quick return to rising peaks and rising troughs, at least a few large demand-side candles (i.e., white-bodied and or downward pointing shadows), and a close above the short term downtrend ribbon very soon, I can’t help but think copper is destined for a rendezvous with the long term uptrend ribbon.

In theory it should offer dynamic demand – and it could prove to be a major point of support from which a meaningful rally may eventuate. That’s all future gazing, and I’m not a prognosticator!

The long term trend ribbon kicks in around 4.275 – so watch out for all that good demand-side control stuff I mentioned above.

(I don't have the charts for you today as we only just did them – but check yesterday's candles on Silver and Gold futures = ⬛💥!)

Economy

Today

• AUS Consumer Price Inflation (CPI) May

  • 4.0% p.a. vs 3.5% p.a. forecast and 3.6% p.a. in April = BIG miss, but RBA most likely to be watching the core CPI (i.e. excluding volatile items and holiday travel). It was also 4.0% p.a. – but at least this was down from 4.1% p.a. in April

  • The most significant price rises were Housing (+5.2% p.a.), Food and non-alcoholic beverages (+3.3% p.a.), Transport (+4.9% p.a.) and Alcohol and tobacco (+6.7% p.a.)

  • From the AFR: "Money markets are now pricing in a 59 per cent chance that the RBA will raise the cash rate to 4.6 per cent by September this year. That’s up from 13 per cent before the data hit"

Later this week

Thursday

• 00:00 USA New Home Sales May (650,000 forecast vs 634,000 in April)

• 11:00 AUS MI Inflation Expectations May (4.1% p.a. in April)

• 22:30 USA Core Durable Goods Orders May (+0.1% forecast vs +0.4% in April)

Friday

• 00:00 USA Pending Home Sales May (-7.7% in April)

• 22:30 USA Core PCE Price Index May (+0.1% to +2.5% p.a. forecast vs +0.2% to +2.7% p.a. in April)

• 22:30 USA Personal Income May (+0.4% forecast vs +0.3% in April)

• 22:30 USA Personal Spending May (+0.3% forecast vs +0.2% in April)

Latest News

Interesting Movers

Trading higher

• +8.4% Winsome Resources (WR1) - No news, turnaround in key lithium carbonate contract in China last couple of sessions helped sentiment in ASX lithium sector

• +7.5% Brainchip (BRN) - Tax loss selling victim vs bargain hunting? Generally stronger ASX tech sector today on positive Wall St. lead, rally is off an extremely low base…

• +6.7% WA1 Resources (WA1) - Metallurgical Testwork Presentation, rise is consistent with prevailing long term uptrend 🔎📈

• +6.6% Polynovo (PNV) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +6.5% Appen (APX) - Tax loss selling victim vs bargain hunting? Generally stronger ASX tech sector today on positive Wall St. lead, rally is off an extremely low base…

• +6.2% Wildcat Resources (WC8) - No news, turnaround in key lithium carbonate contract in China last couple of sessions helped sentiment in ASX lithium sector

• +6.0% Novonix (NVX) - Tax loss selling victim vs bargain hunting? Generally stronger ASX tech sector today on positive Wall St. lead, rally is off an extremely low base…

• +5.7% Droneshield (DRO) - No news, rise is consistent with prevailing short and long term uptrends 🔎📈

• +5.7% Latin Resources (LRS) - No news, turnaround in key lithium carbonate contract in China last couple of sessions helped sentiment in ASX lithium sector

• +4.7% Clarity Pharmaceuticals (CU6) - No news, continued positive response to Monday's Clarity Receives $10 million R&D Tax Incentive, rise is consistent with prevailing short and long term uptrends 🔎📈

• +4.7% Core Lithium (CXO) - No news, turnaround in key lithium carbonate contract in China last couple of sessions helped sentiment in ASX lithium sector

• +4.4% Electro Optic Systems (EOS) - No news, rise is consistent with prevailing long term uptrend, short term is transitioning from down to up 🔎📈

• +4.3% Weebit Nano (WBT) - Tax loss selling victim vs bargain hunting? Generally stronger ASX tech sector today on positive Wall St. lead, rally is off an extremely low base…

Trading lower

• -8.9% Collins Foods (CKF) - Negative response to yesterday's FY24 Appendix 4E and Annual Report 2024, but more likely to broker response - several price target cuts noted in Broker Notes section below

• -8.9% 29METALS (29M) - No news, fall is consistent with prevailing short and long term downtrends 🔎📈

• -8.3% Harvey Norman (HVN) - No news 🤔 If you know…let me know!

• -5.5% Resolute Mining (RSG) - No news, tough day for ASX gold sector today on falling gold and silver prices

• -5.5% Botanix Pharmaceuticals (BOT) - No news, pullback after recent sharp rally

• -5.4% Cettire (CTT) - No news, continued negative response to Monday's Cettire Confirms China Launch, Provides FY24 Update, fall is consistent with prevailing short and long term downtrends (= beware of trying to catch the falling sword!) 🔎📈

• -4.9% Capricorn Metals (CMM) - No news, tough day for ASX gold sector today on falling gold and silver prices

Broker Notes

The A2 Milk Company (A2M)

• Retained at buy at Citi; Price Target: $7.85

Alkane Resources (ALK)

• Retained at buy at Bell Potter; Price Target: $1.10 from $1.25

Alumina (AWC)

• Retained at neutral at Citi; Price Target: $1.65

Bellevue Gold (BGL)

• Initiated at buy at Goldman Sachs; Price Target: $2.20

City Chic Collective (CCX)

• Downgraded to neutral from buy at Citi; Price Target: $0.16 from $0.63

Collins Foods (CKF)

• Retained at sell at Citi; Price Target: $10.60

• Retained at overweight at Jarden; Price Target: $10.01 from $10.25

• Retained at neutral at Macquarie; Price Target: $10.80 from $12.50

• Retained at overweight at Morgan Stanley; Price Target: $13.00 from $14.20

• Retained at add at Morgans; Price Target: $11.20 from $11.50

• Upgraded to buy from neutral at UBS; Price Target: $11.50 from $10.95

Computershare (CPU)

• Retained at outperform at Macquarie; Price Target: $29.00

Cettire (CTT)

• Retained at buy at Bell Potter; Price Target: $2.60 from $4.00

Domino's Pizza Enterprises (DMP)

• Retained at neutral at Macquarie; Price Target: $41.00

Evolution Mining (EVN)

• Retained at buy at Goldman Sachs; Price Target: $4.00 from $4.25

Healius (HLS)

• Downgraded to underperform from neutral at Bank of America; Price Target: $1.30 from $1.50

• Retained at neutral at Macquarie; Price Target: $1.45 from $1.35

James Hardie Industries (JHX)

• Retained at overweight at Morgan Stanley; Price Target: $58.00

• Retained at buy at UBS; Price Target: $60.00

Jumbo Interactive (JIN)

• Retained at overweight at Morgan Stanley; Price Target: $20.80

KMD Brands (KMD)

• Retained at equal-weight at Morgan Stanley; Price Target: $0.35 from $0.55

Arcadium Lithium (LTM)

• Initiated at outperform at RBC Capital Markets; Price Target: US$4.00

Monadelphous Group (MND)

• Initiated at hold at Morgans; Price Target: $14.40

Perpetual (PPT)

• Retained at buy at Bell Potter; Price Target: $27.60

Stockland (SGP)

• Retained at buy at Citi; Price Target: $5.10

Spark New Zealand (SPK)

• Upgraded to overweight from neutral at Jarden; Price Target: NZ$4.67 from NZ$5.03

Strike Energy (STX)

• Retained at buy at Bell Potter; Price Target: $0.31 from $0.29

Super Retail Group (SUL)

• Upgraded to buy from neutral at UBS; Price Target: $15.00 from $13.00

Telstra Group (TLS)

• Retained at buy at UBS; Price Target: $4.40

Treasury Wine Estates (TWE)

• Retained at neutral at Citi; Price Target: $12.95

Webjet (WEB)

• Retained at hold at Jefferies; Price Target: $9.00

• Retained at neutral at Macquarie; Price Target: $9.43

• Retained at overweight at Wilsons; Price Target: $10.04

Scans