ASX 200 afternoon report: April 24, 2023

Last week’s session for the ASX 200 was the quietest since late January with it barely managing to scrape out a 1% range for the week.

With no market-moving news over the weekend, today’s session on the ASX 200 ahead of the Anzac Day holiday tomorrow was confined mainly to some last-minute position adjustments ahead of Wednesday’s all-important Australian Q1 2023 CPI data.

Inflation

Inflation is still well above the RBA’s target band of 2-3%. As the minutes from the April board meeting illustrated, the RBA retains a tightening bias which puts Wednesday’s CPI release squarely in focus.

The key numbers:

• Headline CPI is expected to increase by 1.3% in Q1 2023 for an annual rate of 6.9%
• Trimmed mean is expected to rise by 1.4% in Q1 2023 for an annual rate of 6.7%

Presuming that core inflation (trimmed mean) prints at or below the expectations outlined above, it will likely keep the RBA on the sidelines for another month to allow it to continue to assess the impact of its 350bp or rate rises since last May - which means business as usual for the ASX 200.

However, if Q1 2023 core inflation prints higher than expected, it will likely see the RBA act on its tightening bias to hike the cash rate again as soon as next month, thereby providing the catalyst for the 3% pullback in May that we expect to see.

Coal sector

A fall in the price of iron ore today as it edges close to $100 p/t has weighed on the big miners.

• Fortescue fell 2.6% to $20.93
• Rio Tinto fell 2.6% to $113.98
• BHP fell 1.8% to $44.21
• South32 fell 8.76% after it reported lower output in the March quarter.

Energy stocks

Falls also for Energy stocks as the price of crude oil slumped 5.63% last week to $77.29 on concerns that upcoming central bank rate hikes will crimp energy demand.

• Beach Energy fell 2.51% to $1.46
• Santos fell 1.12% to $7.08
• Woodside fell 0.4% to $33.55.

Banking sector

The big banks have had a mixed day.

• CBA gained 0.65% to $100.36
• NAB gained 0.33% to $28.86
• Westpac traded flat at $22.28
• ANZ fell 0.3% to $24.26.

Lithium sector

A mixed day also for the lithium sector.

• Pilbara Minerals added 4% to $4.18
• Lake Resources fell 4.5% to $0.43c
• Galan Lithium fell 3.2% to $1.07
• Building on four straight weeks of gains, Core Lithium gained 1.82% to $0.98c.

ASX 200 technical analysis

Technically, the rally from 6900 has played out as expected to reach our 7350/70 upside target. While we wouldn’t rule out further gains into month end, we are neutral here, mindful that May and June typically see a pullback in the vicinity of 3-5%.

ASX 200 daily chart

1. TradingView: the figures stated are as of April 24, 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.