The Overnight Report: Momentum

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            [3] => ((LKE))
            [4] => ((SBM))
            [5] => ((PMV))
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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

New Resistance

The ASX200 picked up yesterday where it left off on Friday, opening higher and then enjoying a late morning rally to 7300, where it met a wall. The index was unable to penetrate in the afternoon.

In contrast to recent sessions, energy (-0.6%) and materials (-0.6%) took a breather on lower commodity prices and allowed all other sectors to take the baton.

Most notable was a 1.9% gain for healthcare after a tough last week, thanks to CSL ((CSL)) finally finding some buyers (+2.4%).

Also standing out was a silver medal for typically sedate consumer staples (+1.6%). UBS put out a note yesterday suggesting the outlook for food is positive, upgrading earnings forecasts for Coles Group ((COL)) and Woolworths ((WOW)). The broker believes Woolworths can gain market share against its rival and thus upgraded to Buy, with Coles left on Hold.

Despite consensus believing the RBA has two more rate hikes to go, the banks continued their solid run (+0.9%).

Discretionary and communication services trailed the field each with 0.8% gains while all other sectors rose around 1%, suggesting investors are basically buying the market.

With expectations of two more rate hikes have come increasing odds of Australia hitting a recession, in economist views, up to around even money. But a growing feeling the US might even avoid a recession altogether, despite the possibility of two more Fed hikes as well, has fired up Wall Street and that confidence has spread across the Pacific.

Never mind that economists continue to downgrade their Chinese GDP forecasts. Goldman Sachs joined in yesterday, cutting its 2023 growth forecast to 5.4% from 6.0%.

Train wreck of the day was lithium hopeful Lake Resources ((LKE)), which fell -20% following an update on its lithium brine project in Argentina. The original plan was to be producing 50,000tpa of spodumene concentrate by 2024. The new plan is for 25,000tpa by 2027, at a greater cost.

Lake Resources was as of last week the third most shorted stock on the ASX, at over 8%.

Aside from Lake, another lithium hopeful, a coal miner, a gold miner and a mineral sands miner made up the top five index losers yesterday. Iluka Resources received a downgrade from UBS.

Woolworths came in fifth on the winners’ board.

With Wall Street closed overnight, our futures are up 12 points this morning, implying an attempt to break through 7300, to meet the prior high in April.

Commodities

Base metal prices had pushed higher on anticipation of Chinese stimulus in the wake of ever weaker economic data but aside from a tweak from the PBoC, the silence from Beijing has been deafening.

In a thin ex-US market last night, confidence waned.

Ditto the oils.

The other problem is that since the US debt ceiling was resolved, the US dollar has been pushing quietly higher, and the northern summer is also a seasonally quiet time for commodities demand.

That rising dollar has the Aussie falling back further, down -0.3% this morning at US$0.6855.

Today

The SPI Overnight closed up 12 points or 0.2%.

The minutes of the June RBA meeting will be released today, perhaps providing more insight into further rate hike intentions, noting that the meeting preceded the strong May jobs report.

St Barbara ((SBM)) holds an EGM today.

Premier Investments ((PMV)) goes ex.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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