ASX 200 afternoon report: May 18, 2023

The ASX 200 trades 36 points (+0.50%) higher at 7235 at 3.15pm AEST.

The US debt ceiling

The ASX 200 trades 36 points (+0.50%) higher at 7235, enjoying a positive tailwind from Wall Street and weaker Australian jobs data that has increased expectations that the RBA will keep rates on hold when it meets in June.

There is a thumping rally on Wall Street based on signs that a deal will be struck to lift the US debt ceiling before the X-date.

Two signs of progress stood behind the move with the first being President Joe Biden’s announcement that he will cut short his trip to Asia is viewed as a sign of his commitment towards a deal. The second, is a decision to reduce the number of staff on the negotiating team, evidence that talks have moved to a more advanced stage.

The RBA

Coming hot on the heels of softer-than-expected Q1 wages data yesterday, a weaker-than-expected jobs report released this morning has raised hopes that the RBA will refrain from raising rates when it meets in June.

The unemployment rate rose to 3.7% from 3.5% in March as jobs fell by 4.3k, missing forecasts for a rise of 25k. The rates market sees next to zero probability that the RBA will raise rates again in June.

However, the same could also be said for May, when the RBA surprised the market.

IT stocks

The IT sector has been the strongest, bolstered by an 8.2% gain in Xero to $101.82 after it reported strong revenue and subscriber growth in FY23.

• Appen gained 3.90% to $2.40
• Block added 2.92% to $86.13
• former BNPL poster child ZIP added 2.25% to $0.57c.

Coal sector

Gains for the big miners after iron ore prices rallied 2.9% overnight to $108.10.

• Mineral resources added 4.96% to $75.75
• Rio Tinto gained 2.06% to $110.51
• Fortescue gained 1.5% to $20.55
• and BHP added 1.3% to $44.33.
  

Banking sector

Enjoying the idea of an RBA back on hold, the banks have gained.

• Macquarie added 1.1% to $174.04
• NAB added 1% to $26.45
• CBA added 0.86% to $98.00
• ANZ added 0.4% to $23.68
• Westpac gained 0.36% to $21.00.

Lithium sector

A breather pausing for breath earlier in the week, the Lithium sector has extended its phenomenal run higher.

• Pilbara Minerals added 3.06% to $4.89
• Allkem added 2.53% to $15.21
• Iluka added 1.9% to $11.32
• IGO gained 1.3% to $14.87.

Gold sector

Gold has fallen below $1980 during the Asian time zone undercut by a rally in the US dollar, US yields, and optimism that a deal will soon be struck to lift the US debt ceiling. Local gold miners have fallen, led by Gold Road Resources.

• Gold Road Resources lost 2.13% to $1.84
• Northern Star Resources fell 1.06% to $13.48
• Silver Lake Resources fell 0.7% to $1.08.

A notable mention for Nufarm trading 14.15% higher at $6.05 after it saw its profit soar by more than 50% to $ 149 million with its seed technologies recording double-digit growth.

ASX 200 technical analysis

Technically we don’t hold a strong directional view of the ASX 200 at this point (which is highly unusual for us).

Noting that the ASX 200 is trading sideways above a strong layer of support between 7100 and 6900 (from the 200-day moving average, uptrend support and year-to-date lows). And below downtrend resistance at 7330, coming from the February 7567 high.

ASX 200 daily chart

^{TradingView: the figures stated are as of May 18, 2023. 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.}