The stock market rose as strong gains in blue chips offset heavy bleeding into speculative pockets of the market after Goldman Sachs announced a top in the green metals.
The S&P/ASX 200 put on 23 points or 0.32 percent. Most of the gains came during the closing auction when institutional investors found volume for large trades.
A “bigger is better” session saw most of the market heavyweights gain while small caps and speculative stocks declined.
Fortescue Metals, Telstra and Transurban led the advance of the behemoths. Lithium and nickel miners posted double-digit falls as a two-year rally in battery metals hit a speed bump.
What moved the market
A sharply divided market brought quiet progress for investors at the high end of the market and a sobering session for those betting on the Green Revolution.
Sixteen of the ASX 20’s twenty giants rallied, lifting the heavyweight index by 1.37%. In contrast, the speculative end of the market as measured by the S&P/ASX Emerging companies The index slipped 2.24%. Small Ords fell 1.7%.
The headlines masked the scale of the carnage among lithium and nickel miners after Goldman said the bull market in battery metals was over. Investment bank analysts have estimated that lithium prices could lose three-quarters of their value by 2023. The bank predicted the spot price could drop more than US$60,000 a ton earlier. this year to 16,000 US dollars.
“Investors are fully aware that battery metals will play a crucial role in the global economy of the 21st century,” analysts Nicholas Snowdon and Aditi Rai wrote. “Yet, despite this exponential demand profile, we consider the bull market for battery metals finished for now.”
The note was issued Sunday night US time and went unnoticed here until US miners lost ground overnight. Today’s results were breathtaking for investors in the green metal cycle.
Downgrades to Credit Suisse ratings added to the pressure. Pilbara Minerals fell 20.03% after CS downgraded its rating to ‘Neutral’. Allkem, also downgraded to neutral, fell 15.39%.
Nickel miner IGO lost 11.71%. Liontown Resources fell 19.08% and Mineral Resources fell 8.07%. Nickel junior Resource Mining Corporation lost nearly a third of its value after announcing plans to drill in Tanzania.
The market took off overnight on Wall Street as trading resumed after the Memorial Day long weekend. The S&P500 fell 0.63% in its first loss in four sessions.
Investors weren’t worried by the news either. economic growth slowed last month as the reopening boom at the end of last year faded. The economy grew 0.8% in the March quarter, down from 3.6% growth in the last three months of 2021.
Year-on-year growth was 3.3%, above expectations. The dollar fell 0.16% to 71.71 US cents.
“The recently released GDP figures will be closely watched by market participants, including the RBA for its interest rate decision next week,” Kalkine Group chief executive Kunal Sawhney said.
“Financial markets are pricing in another interest rate hike by the central bank at its June meeting. There are concerns that continued aggressive monetary policy tightening by the central bank could push the economy into recession, which could weigh on stock market valuations.
“However, the reopening of the Chinese economy should alleviate some of the concerns about the Australian economy falling into recession.”
The day’s gains were heavily concentrated at the top of the market. Fortescue Metals climbed 3.23%, Telstra 3.09% and Transurban 2.44%. BHP added 2.33%, Coles 1.54% and Woolworths 1.5%.
In the banking space, Commonwealth Bank put on 2.25 percent, ANZ 1.08 percent and Westpac 0.96 percent.
NAB strengthened by 0.93% after completing the acquisition of Citigroup’s consumer business. CEO Ross McEwan said the purchase gave the bank “greater scale in unsecured lending and supports investment in new technology.”
original energy fell 13.72% after volatility in commodity prices prompted it to drop its 2023 guidance. The company attributed the move to “extreme volatility in commodity markets”, which affected coal deliveries and the costs of its Eraring power plant. FY22 earnings were expected to be in the middle of the $1.95 billion to $2.25 billion forecast.
“There is a very high degree of uncertainty surrounding the range of earnings results for fiscal year 2023. As a result, Origin has withdrawn all guidance for fiscal year 2023. Origin will continue to assess the outlook, with a view to provide a full year results update in August,” the company said.
Growth stocks were put under pressure by a rally in bond yields. Zip Co fell by 8.74%, PointsBet by 12.46% and Telix Pharmaceutical by 7.73%.
mesoblast fell 2.54% after higher revenue and lower research costs helped narrow its third-quarter loss. Revenue increased 5% to $2 million. Cash usage decreased by 40% to $15.5 million. The loss for the quarter was US$21.3 million, compared to US$26.5 million in the prior quarter.
A mixed afternoon on Asian markets saw the Asia Dow gain 0.09% and the Japanese Nikkei gain 0.48%. China’s Shanghai Composite fell 0.61%. Hong Kong’s Hang Seng lost 1.02%.
US Futures Contracts forfeited previous earnings. S&P 500 futures returned to neutral after rising about 0.5%.
Oil also lost its initial earnings. Brent crude for August delivery has been flat lately at US$115.60 a barrel.
Gold slid US$13.90 or 0.75% to US$1,834.50 an ounce.