Energy glows as ASX lifts higher for 3rd straight day, closes 0.3% higher

Market Reports

by Melissa Darmawan

Australian stocks posted its third straight day of gains pushed higher by the index’s largest banks, miners, and energy stocks, notching its longest winning streak since mid-March.

At the closing bell, the S&P/ASX 200 was 0.3 per cent or 20 points higher at 7,113.

Today, 98 of 200 shares rose, while 91 fell, there were five winning sectors out of the 11, led by heavyweight materials with the energy sector leading the pack.

RBA mulled on 40bp rate hike

Investors learned that the central bank pondered on three options for its first interest rate hike this month, before increasing it by a surprise 25 basis points, more than what economists were expecting.

The release sent the Aussie dollar higher with a 70 handle, equities pared back gains, while treasury yields rose.

The board agreed that raising the interest rate by 15 basis points as forecasted by economists didn’t make sense given policy was “very stimulatory and it was highly probable further rate rises would be required”. The RBA acknowledged the terms for an increase of 40 basis points, before opting for 25 basis points as the “preferred option”.

The central bank also pondered on reinvesting bonds as they matured which would "maintain the stimulus associated with the stock of bonds held by the Bank but it would be inconsistent with the strength of the economy and the high level of inflation". In contrast, “the option of not reinvesting bonds as they matured "would mean the stimulus associated with bond purchases would be removed gradually and predictably."

The meeting minutes come ahead of the annual wages growth to show an increase to 2.5 per cent for April and the jobs report on Thursday with the jobless rate to fall under 4 per cent to a new record low.

Oil prices powered up energy sector

A challenging global economic outlook amid elevated food and fuel costs and tightening monetary settings continues to shape sentiment. Oil has jumped to about $114 a barrel and an index of agricultural prices is at a record high.

Woodside Petroleum (ASX:WPL) rose 2 per cent to $31.11, Santos (ASX:STO) added the same percentage rise of 2 per cent to $8.25 while Beach Energy (ASX:BPT) soared 6.1 per cent to $1.73.

Havilah Resources (ASX:HAV) skyrocketed 79 per cent higher to 30.5 cents after it inked a binding term sheet with OZ Minerals (ASX:OZL) to potentially sell its Kalkaroo copper-gold project for $205 million. OZ Minerals has 18 months to decide whether it will acquire the project. Shares in OZ Minerals rose 2.7 per cent to $22.03.

Nickel Mines (ASX:NIC) also released news that the miner inked a binding term sheet with Singapore-based power producer Quantum Power Asia for the implementation of a 220 megawatt peak solar project. Shares jumped 3 per cent to $1.19.

Meanwhile, Shanghai reported three days of zero community transmission, a milestone that could lead officials to start unwinding its lockdown, giving support to the local iron ore miners and energy players.

Fortescue Metals Group (ASX:FMG) added 2.3 per cent higher at $19.39, Rio Tinto (ASX:RIO) 2.2 per cent to $106.67, while BHP closed 0.6 per cent higher to $45.56.

Commonwealth Bank of Australia (ASX:CBA) closed 1.7 per cent higher at $105.12 doing the heavy lifting for the index.

BlueScope Steel (ASX:BSL) climbed as much as 4.8 per cent, the most since March 25 after Goldman Sachs lifted its rating to buy from neutral, saying the stock is undervalued compared with US peers. Shares rose 2 per cent to $17.93.

JPMorgan’s equities desk has crossed a near $300 million stake in AGL Energy (ASX:AGL) in a block trade that should bolster up Mike Cannon-Brookes’ votes ahead of a shareholder vote. The trade which occurred in early afternoon, saw 33.4 million shares change hands at $8.75 each, which was about a 2.5 per cent premium to the share price at the time. It is understood that a line of 33.4 million shares were crossed at $8.75, equivalent to 5 per cent of the company. The amount equates to $292 million, according to the AFR. Shares closed 2.3 per cent higher to $8.62.

After a stellar performance yesterday, Brambles (ASX:BXB) nearly gave back its gains after it lost a potential suitor, CVC between trading sessions, after investors were pondering on a $20 billion bid.

What’s next?

Investors now turn to Wall St as Fed Bullard is set to speak at 11pm (AEST), Fed Chair Jerome Powell is scheduled to talk at a panel hosted by the Wall St Journal, April retail sales figures are due with economists expecting a rise of 0.9 per cent over the month, while eyeing the share price of Twitter as Elon Musk sparked speculation that he could look to renegotiate his takeover of the social media company, saying a viable deal at a lower price wouldn’t be “out of the question.”

Local economic news

Consumer confidence fell for its third straight week by 1.3 per cent last week to its lowest level since mid-August 2020, according to ANZ and Roy Morgan.

Company news

Mining tech giant Calix (ASX:CXL) is the beneficiary of a federal grant for a second day, this time with Pilbara Minerals (ASX:PLS). The tech giant has been awarded a $20 million grant from the Australian government for a joint venture chemicals facility at the Pilgangoora lithium project in WA. This follows the news on Monday where Calix and Boral (ASX:BLD) secured $30 million for a carbon abatement project at Boral's cement and lime facilities in NSW. Shares in Calix (ASX:CXL) jumped 4.2 per cent at $6.93 while shares in Pilbara Minerals (ASX:PLS) jumped 5 per cent at $2.73.

NAB (ASX:NAB) is considering the launch of a new NAB Capital Notes offer in June this year which may include a reinvestment offer for only certain NAB Capital Notes 2 holders. The board still needs to give its tick of approval and is also subject to market conditions. Shares closed 0.5 per cent higher to $31.46.

United Malt’s (ASX:UMG) underlying EBITDA came in line with Bloomberg consensus of $57 million but down 5 per cent on the prior corresponding period for the half year ended March 31. Group revenue rose 11 per cent to $652 million attributed to increased customer demand and higher price of barley. However, this was offset by external factors such as the Canadian drought, strained supply chain, and higher input costs. Shares closed 0.2 per cent higher to $4.91.

OFX (ASX:OFX) climbed as high as 11 per cent after posting its full year ending 31 March, net operating income of $147 million, up 24.7 per cent year on year. Wilsons said the company’s corporate unit “continues to deliver.” Shares soared 8.9 per cent to $2.70.

James Hardie (ASX:JHX) tumbled to as low as 5.1 per cent after the company maintained its financial year 2023 adjusted net income target, disappointing investors. Shares closed 3.5 per cent lower to $37.49.

The Lottery Corporation (ASX:TLC) is slated to join the ASX 200 as of 24 May as a result of the scheme of arrangement where Tabcorp Holdings Limited (ASX:TAH) will spin-off The Lottery Corporation (ASX:TLC). Shares closed 1.4 per cent higher to $5.18.

Broker moves

Morgans retained an add rating and hiked Coronado Global Resources’ (ASX:CRN) target price to $2.97 from $2.73. The team of commodity strategists have raised the forecasts for metallurgical coal price driving up the company’s earnings per share forecasts up to 33 per cent from this financial year to 2024. The 2022 to 2024 hard coking coal forecast lifts by 6-15 per cent. Shares closed at session high, 5.1 per cent higher at $2.29.

UBS retained Webjet’s (ASX:WEB) rating as buy with a reduced price target to $6.75 from $6.95. The broker observes domestic volumes remain strong while there is downside risk to the demand of Aussies travelling overseas. The broker notes three points to the upside, one is the potential for share market gains, cost efficiencies leading to higher EBITDA margins, and lastly, a Canadian competitor called Trip Ninja set to speed up the structural shift of leisure travel online. Shares added 0.2 per cent to $5.65.

The Dow Jones futures are pointing to a rise of 121 points.
The S&P 500 futures are pointing to a rise of 20 points.
The Nasdaq futures are pointing to a rise of 99 points.
The SPI futures are pointing to a rise of 31 points when the market next opens.

Best and worst performers

The best-performing sector was Energy, up 2.1 per cent. The worst-performing sector was Real Estate Investment Trusts, down 1.2 per cent.

The best-performing stock in the S&P/ASX 200 was Lynas Rare Earths (ASX:LYC), closing 6.6 per cent higher at $9.42. It was followed by shares in Beach Energy (ASX:BPT) and Whitehaven Coal (ASX:WHC).

The worst-performing stock in the S&P/ASX 200 was Brambles (ASX:BXB), closing 7.6 per cent lower at $10.72. It was followed by shares in PointsBet Holdings (ASX:PBH) and REA Group (ASX:REA).

Asian markets

Japan's Nikkei has gained 0.4 per cent.
Hong Kong's Hang Seng has gained 2.7 per cent.
China's Shanghai Composite has gained 0.4 per cent.

Commodities and the dollar

Gold is trading at US$1828.07 an ounce.
Iron ore is flat at US$127.35 a ton.
Iron ore futures are pointing to a rise of 0.4 per cent.
Light crude is trading $0.06 lower at US$111.76 a barrel.
One Australian dollar is buying 70.08 US cents.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, ANZ & Roy Morgan, Australia Bureau of Statistics

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