The Match Out: ASX hits 7400 resistance, Strength in tech not enough to offset commodity weakness, BHP has a soft quarter of production

James Gerrish

Market Matters

The ASX bumped up against the 7,400 resistance level today, as weakness among Materials was offset by strength in the IT space. Overall, the day saw no real net gain/loss at the index level but again, there was plenty happening under the hood as the RBA once again poured cold water on rate hikes.

  • The ASX 200 slipped -6pts /-0.08% to 7,374.
  • IT and Real Estate were strong, while materials was the weakest link alongside Energy

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  • The RBA said that higher interest rates would cool housing, but then went further to say it would come at the cost of fewer jobs and weaker wages growth – which is not what it wants. Instead, the RBA will look further at portfolio restrictions on individual lenders’ share of lending at high debt-to-income ratios; and/or Limits on lending at high loan-to-valuation ratios

  • Uranium stocks were strong today - Paladin (ASX: PDN) +8% - following news that Kazatomprom (the Kazakh firm that is the world’s #1 uranium producer) has launched a new physical fund - no doubt thanks to the success of the Sprott Physical Uranium Trust we’ve written about before. The new fund was seeded with $US50 million by its founders and plans to raise US$500 million for additional uranium purchases in a second development stage. It’s another bullish sign for the market, but we’d be reluctant to chase uranium stocks after such a strong run – remember, volatility in the space will remain high.
  • BHP Group (ASX: BHP) -2.04% was out with quarterly production numbers that were on the soft side due to maintenance – Harry covers more on this below.
  • Brambles (ASX: BXB) +0.20% rallied this morning after reporting first-quarter revenue growth and issuing guidance for the full year. First quarter sales revenue from continuing operations of $1.29 billion was up 9% year-on-year and sees financial year revenue at constant FX rates of +5% to +7%.
  • IDP Education (ASX: IEL) +1.59% The CEO says the firm is tracking well, with student volumes to Northern Hemisphere destinations up 120% in the first quarter of FY22 versus the same period last year.

    Tabcorp (ASX: TAH) -2.68% Management said today that its wagering division revenue for the three months to September 30 was down 17.2% compared with the same period last year.
  • A few stocks catching my eye today in the MM Portfolios, Pointsbet (ASX: PBH) rallied +3.5% and looks poised to break higher, A2 Milk (ASX: A2M) +5.29% also looks good while Zip Co (ASX: Z1P) had a delayed response to a strong quarterly yesterday, rallying +5.19% today. Appen (ASX: APX) and Nuix (ASX: NXL), two stocks in the IT space that we don’t own are also starting to attract interest – these two are on our radar.
  • Gold was higher in Asia, +$US6 to $US1774, Iron Ore Futures were a touch lower.
  • Asian markets were all up, Japan up +1%, Hong Kong 1% while China added +1.4%.
  • US Futures are trading flat

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ASX 200 chart

BHP Group (ASX: BHP) $38.39

BHP -2.04%: It was a maintenance-heavy first quarter weighed on the headline numbers today but the stock held up well, falling in line with iron ore peers. BHP saw Copper production fall 9% year-on-year to 377kt, iron ore down marginally to 63mt and coal production, both metallurgical and energy, fall around 10% in the September quarter. Petroleum was the only area that printed better than 1Q21, hitting 28MMboe to start the year with BHP saying we will hear more about the demerger of that unit into Woodside (ASX: WPL) in November. The positive news was that scheduled maintenance weighed on the first quarter, but it will set operations up for a strong three quarters with the company maintaining production guidance across the board.

MM is bullish BHP

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BHP Group

Northern Star (ASX: NST) $9.40

NST -0.11%: It’s been a busy few months for gold miner Northern Star and it looks to have taken some focus off its production to kick off FY22. With a new CEO in place and a big dream of 2moz/yr in his five-year plan, plenty of little deals have been taking place but gold production fell in the first quarter. A total of 386koz of gold was sold at an average price of $2,345/oz, costing them $1,594/oz – a healthy margin but well below where they finished in FY21. Northern Star did maintain guidance and traded largely in line with gold peers today.

MM is bullish NST.

Northern Star

Broker moves

  • HomeCo Raised to Neutral at JPMorgan; PT A$7.50

  • Aristocrat Raised to Outperform at Macquarie; PT A$52.75

  • Senex Cut to Neutral at Citi; PT A$4.32

  • Nick Scali Raised to Overweight at Wilsons; PT A$17

  • Westpac Rated New Underweight at Jarden Securities; PT A$25.40

  • NAB Rated New Overweight at Jarden Securities; PT A$31

  • CBA Rated New Overweight at Jarden Securities; PT A$103.80

  • HomeCo Cut to Neutral at Jarden Securities; PT A$7.70

  • ANZ Bank Rated New Neutral at Jarden Securities; PT A$29

  • Bank of Queensland Rated New Overweight at Jarden Securities

  • Bendigo & Adelaide Rated New Neutral at Jarden Securities

  • Bluescope Cut to Equal-Weight at Morgan Stanley; PT A$23.50

  • GPT Group Cut to Neutral at Credit Suisse; PT A$5.26

  • Senex Cut to Hold at Morgans Financial Limited; PT A$4.30

  • Cochlear Raised to Neutral at Evans & Partners Pty Ltd; PT A$190

  • Ramelius Cut to Hold at Argonaut Securities; PT A$1.35

  • Healius Rated New Equal-Weight at Barrenjoey; PT A$4.90

  • Senex Cut to Neutral at JPMorgan; PT A$4.40

  • Atlas Arteria Raised to Add at Morgans Financial Limited

Major movers today

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Portfolio Manager
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James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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