ASX200 Afternoon Report July 14th 2022

The ASX200 is trading 32 points higher at 6654 at 3.10 pm Sydney time.

The release of a thumping Australian job report that saw the unemployment rate fall to a 50-year low of 3.5% has fuelled expectations the RBA will raise rates more aggressively to contain wages inflation and inflation expectations.

Reflecting the possibility of a supersized 75bp rate hike at the RBA's August 2^nd Board Meeting, yields at the front end of the Australian interest rate curve rallied by 10bp undermining the ASX200's latest attempt to break above a band of short term resistance at 6650/60.

The repricing of RBA rate hikes expectations today comes hot on the heels of the release of a shockingly high U.S inflation number. Headline CPI rose to 9.1% in June, while the run rate of core inflation re-accelerated to 5.9%, above the 5.7% expected.

The hotter-than-expected U.S inflation print delays expectations for a dovish Fed pivot and raises the prospect that the Federal Reserve will follow the Bank of Canada's lead with a "get big or get out" 100 bp rate hike at the next FOMC meeting on July the 28^th.

The real estate sector has been the day’s worst performer due to the repricing higher of interest rates. Charter Hall group fell 2.33% to $11.30, Stockland Corp fell 2.1% to $3.72, Goodman Group fell 1.2% to $18.81, and Shopping Centres Australia fell 0.9% to $2.81.

Also feeling the heat of higher interest rates, the Financial Sector. ANZ fell by 2% to $21.98. Westpac lost 1.7% to $19.83. CBA fell 1.55% to $93.15, NAB fell 0.5% to $28.32. While Macquarie fell 0.85% to $169.95.

After recording five consecutive weeks of falls and desperate to avoid a sixth, the Materials sector has rebounded, led by another round of stellar gains by the coal miners on reports that China would end its unofficial ban on Australian coal imports in the coming months.

Coronado Coal gained 8.4% to $1.75, Yancoal added 8.16% to $5.57, Whitehaven coal added 6.8% to $5.76, and New Hope Coal added 6.7% to $4.29.

Iron Ore stocks also chimed in, with BHP adding 2.3% to $37.76, Rio Tinto adding 2.34% to $96.31, and FMG adding 2.65% to $17.44. Elsewhere Mineral Resources added 4% to $46.16, and Lynas Rare Earths added 5.6% to $8.09. 

Tech stocks have extended their rebound, led by EML payments after it added +12.3% to $1.05. Nonetheless, EML remains sharply down on the week after the departure of its CEO Tom Cregan. Elsewhere Novonix added 4.4% to $2.15, Megaport added 3.2% to $6.81. Seek added 2.45% to $22.22 and Tyro Payments added 2.3% to $0.67c. Afterpay owner Block bucked the trend falling by 1.5 to $95.26.

Lithium miners have mostly recorded gains. Vulcan energy climbed strongly for a second straight day by 5.7% to $5.93. Liontown Resources added 4% to $0.9, Pilbara Minerals added 3.8% to $2.46, Core Lithium added 3.43% to $0.91c while Lake Resources bucked the trend falling by 5.2% to $0.64c.

Turning to the charts, the ASX200 needs to see a sustained break above the 6750/6950 resistance zone to negate the technical damage caused by the breakdown in June. Until then, downside risks remain.

Source Tradingview. The figures stated are as of July 14th, 2022. 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

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