Evening Wrap: ASX 200 slides as hawkish Fed hits mining stocks – gold, uranium, lithium under pressure
The ASX 200 took a hit today, with the S&P/ASX 200 (XJO) finishing 55.2 points lower at 8,911.1, a 0.82% decline from its session high and smack-bang on its session low. This comes as the hawkish tone of Wednesday's Federal Reserve meeting struck at investor confidence, triggering a selloff in the US bond market and sending the yield on 2-year US T-bonds soaring 13.2 basis points. The US dollar index also surged by 85 basis points as investors favored the currency in a higher US-domestic interest rate outlook environment.
As major commodities like gold and base metals are typically denominated in US dollars, the surge in the US dollar against its counterparts is seen as a negative for commodity prices and, by extension, commodity stocks. Higher benchmark yields also hurt 'long duration' stocks, particularly those with forecast earnings set in the distant future, such as Information Technology. This sector saw significant losses, with stocks like Xero (XRO), WiseTech Global (WTC), Siteminder (SDR), and Life360 (360) all down.
Gold stocks took a hit, with precious metals prices falling due to US dollar strength. However, higher risk-free yields increase the opportunity cost of holding non-yielding assets like gold. For gold stocks, the falling oil price likely provided some shield against the lower gold price, as it helps reduce one of their key input costs — diesel. Stocks like Ora Banda Mining (OBM), Pantoro Gold (PNR), Evolution Mining (EVN), and Northern Star Resources (NST) were all lower.
Materials stocks followed a similar theme, with modest losses despite being hit by a triple whammy of factors: a potentially slower growth outlook for the US economy, higher market rates acting as a handbrake on broader global growth, and the higher US dollar negatively impacting commodity prices. BHP (BHP) and Fortescue (FMG) were both lower.
Bond proxy sectors like Real Estate (XPJ) and Financials (XFJ) were also lower as their yields now face stiffer competition from risk-free bonds. Notable stocks in these sectors include Stockland (SGP), Dexus (DXS), Goodman Group (GMG), HMC Capital (HMC), Westpac (WBC), Commonwealth Bank (CBA), National Australia Bank (NAB), ANZ (ANZ), and Macquarie Group (MQG).
Unrelated to the Fed meeting, the price of benchmark lithium carbonate futures got belted today, down over 6% on China's GFEX. This affected lithium-focused stocks like Liontown Resources (LTR), Vulcan Energy Resources (VUL), IGO (IGO), Pilbara Minerals (PLS), and Elevra Lithium (ELV), all of which were lower.
In other news, the A2 Milk Company (A2M), Coles (COL), and Woolworths (WOW) led the Consumer Staples sector, which gained 0.7%. Within the Health Care sector, 4DMedical (4DX), Cochlear (COH), Ramsay Health Care (RHC), CSL (CSL), and Telix Pharmaceuticals (TLX) all gained.
The Evening Wrap also includes detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch, as well as a list of the top gainers and losers on the ASX Top 300. Additionally, there's a section on interesting movers, including Cauldron Energy (CXU), Atomic Eagle (AEU), Lotus Resources (LOT), Actinogen Medical (ACW), Lifestyle Communities (LIC), KGL Resources (KGL), Beacon Minerals (BCN), Electro Optic Systems Holdings (EOS), Washington H. Soul Pattinson and Co. (SOL), Melbana Energy (MAY), Tungsten Mining NL (TGN), PMET Resources Inc (PMT), and more.
Finally, the article concludes with a look at the S&P/ASX 200 (XJO) and the key levels to watch, as well as a discussion on the implications of the Fed meeting and the potential impact on the market. The author also mentions the upcoming ChartWatch LIVE Webinar, which will focus on why Elon Musk should sell 1.6 billion SpaceX shares right away and a major Nasdaq top signal.
