The Match Out: Market edges higher, Lithium stocks tumble

James Gerrish

Market Matters

A fairly muted session today on the ASX with the defensive sectors doing well while those exposed to economic weakness struggled. Energy is at the pointy end of that, a crowded trade that is unwinding however if we see another ~10% downside we’ll likely step back into the sector.

  • The S&P/ASX 200 added +19 points / +0.31% to close at 6528.
  • Real-Estate (+2.56%) & Healthcare (+1.97%) were the standouts.
  • Energy (-2.06%) and Materials (-1.50%) underperformed.
  • Expectations around interest rates have changed in the last week – from pricing a certain 50bps to now ‘only’ pricing an 80% chance when the RBA meet in July. That’s hurt to AUD which today settled smack on 69c.
  • It’s also been supportive of the oversold property stocks that were pricing the scorched earth sort of scenario – Goodman (GMG) a standout today up +4.87%.
  • Oil has taken a beating this week as concerns that a US recession is just around the corner hurt prices – Crude has now fallen over ~20% and it approaching $US100/bbl - Santos (STO) and other energy stocks have followed suit.
  • The small end of the Lithium sector has been where the real carnage has been, today Lake Resources (LKE) -16.67% fell sharply having only just gone into the ASX 200. Nothing like having your MD quit and then offload over $10m worth of stock to get the price lower. This has filtered into the other parts of the Lithium space, IGO (IGL) that we own dropped below $10 today into our targeted buy zone – we still plan to add to our position at some stage.
  • Lower grade iron Ore, the stuff that Fortescue (FMG) -2.1% mines has fallen from ~US$140/tonne to $US98.70/tonne
  • Iron ore futures down up 2.3% today recovering some recent losses.
  • Gold was flat ~US$1834 in Asia.
  • Asian markets were up, the Nikkei in Japan Flat, Hong Kong stocks rallied +1.38% while China was up 1.76%
  • US Futures are down a touch, ~0.20% across the board.

ASX 200 Chart

Ramelius (RMS) 99.5c

RMS -8.72%: another gold miner that has been forced to downgrade near the end of the period as conditions become increasingly more difficult. They’ve blamed the poor weather, COVID & influenza as well as lower grade when putting through a small downgrade to production guidance for the full year today, from 260-260koz down to 255-260koz. For the most part, these issues aren’t company-specific and they will pass with time. Gold miners will also need a commodity tailwind to get investors interested again. One positive was that RMS didn’t push costs higher, though they are expected to land at the top end of the previously guided $1,475-1,525/oz range.

Broker Moves

  • St Barbara Cut to Neutral at Macquarie; PT A$1
  • Resimac Group Cut to Neutral at Macquarie; PT A$1.30
  • Regis Resources Cut to Underweight at Morgan Stanley; PT A$1.75
  • St Barbara Cut to Hold at Canaccord; PT 90 Australian cents
  • Link Administration Raised to Overweight at Morgan Stanley
  • Wesfarmers Raised to Positive at Evans & Partners Pty Ltd
  • Neuren Rated New Buy at Jefferies; PT A$5.40

Major Movers Today

Enjoy your night
The Market Matters Team

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James Gerrish
Portfolio Manager
Market Matters

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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