ASX 200 afternoon report: April 18, 2023

The ASX 200 trades 35 points (-0.48%) lower at 7345 at 3.10pm AEST.

US rate market

The ASX 200 has fallen from the opening bell today following a second successive session of hotter-than-expected US economic data, which further undercut expectations that the Feds is close to pausing its rate hiking cycle.

The NY Empire State Manufacturing Survey increased to 10.8 vs. expectations of -18.

The US interest rate market is now almost fully priced for a 25bp rate hike at the May FOMC meeting in two weeks and is about 12% priced for a 25bp rate hike in June.

Worries that further Fed rate hikes will weigh on global growth and demand for crude oil have undercut support crude oil as it fell 2% overnight to $80.83. Today Viva Energy fell 1.9% to $3.12, Woodside Energy fell 1.9% to $34.06, Santos fell 1.57% to $7.21, and Beach Energy fell 0.5% to $1.50.

A stronger US dollar and expectation of higher rates have weighed on the price of bullion as it slipped below $2000 per ounce overnight. St Barbara fell 9.84% to $0.55c after it agreed to sell its Leonora assets. Silver Lake Resources fell 2.75% to $1.23, Perseus Mining fell 1.9% to $2.35, and Evolution Mining fell 1.12% to $3.52.

RBA

The release of the RBA meeting minutes this morning noted that the Board discussed the various pros and cons of raising rates by a further 25bp or keeping rates on hold at 3.60%.

“[O]n balance, [we] agreed that there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings.”

The minute included the hawkish observation that higher immigration “could put significant pressure on Australia’s existing capital stock, especially housing, which would, in turn, manifest in higher consumer prices.”

The risk of a 25bp rate hike in May is high, particularly if the Q1 CPI release next week is hotter than expected. A possibility that rattled consumer-facing stocks which showed way too much bravado yesterday. Woolworths fell 1.82% to $38.57. Treasury Wine Estates fell 1.54% to $14.06, Coles fell 1.29% to $17.99, and JB Hi-Fi fell 1.29% to $45.11.

It was a mixed day for the big banks, wary of a hawkish RBA. Macquarie fell 0.5% to $179.78, CBA fell 0.36% to $99.38, ANZ fell 0.3% to $24.14, and NAB rose 0.17% to $28.78.

The release of stronger-than-expected Q1 Chinese GDP around lunchtime (4.5% vs 4% expected) helped Mineral Resources gain 2% to $82.14. Rio Tinto added 0.3% to $121.65, while BHP fell 0.2% to $46.52, joined by Fortescue, which fell 0.31% to $22.43.

Another eventful day in the Lithium space as Core Minerals surged 7.3% to $1.00 after it announced a significant increase in its Finniss Lithium Operations mineral resource estimate. Pilbara Minerals added 4.5% to $3.98, Allkem added 4% to $12.07, and IGO Limited added 2.66% to $13.90.

ASX 200 technical analysis

After holding support at 6900, the ASX 200 last week reached the 7350 target we first pinpointed on March 28 here for a gain of ~4.5% in just nine trading sessions. At the halfway mark for April, the ASX 200 is up +2.58% month to date, which is about spot on for April.

While we wouldn’t rule out further gains into month end, we aren’t interested in chasing the market higher here, mindful that May - June typically see a pullback in the vicinity of 3-5%.

ASX 200 daily chart

1. TradingView: the figures stated are as of April 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.