ASX200 Afternoon Report May 16th 2022

The ASX200 is trading 25 points higher at 7100 at 3.15pm Sydney time, 50 points below its morning high after weak Chinese economic data inflamed growth concerns.

Industrial production unexpectedly fell by 2.9% YoY in April 2022, missing expectations of a 0.4% gain. Retail sales fell 11.1%, well below expectations of a 6.5% fall. The unemployment rate climbed to 6.1%.

To help ease concerns, the National Bureau of Statistics released a statement soon after "The impact of COVID 19 was temporary and the economy was expected to stabilise and recover."

However, with the Chinese government dogmatically pursuing a "Covid-zero" strategy on top of lingering headwinds from last year's regulatory reset, Chinese policymakers' task to revive the spluttering Chinese economy is becoming more herculean by the day.

After today's data, the risks are that Chinese growth prints well below 4%, less than half of last year's 8.1% growth rate. Less we forget, the Chinese economy is the second largest in the world and Australia's largest trading partner.

A fact not lost on our resource stocks, with the big miners mostly trading lower. Rio Tinto (Rio) fell 1.6% to $103.81, Fortescue Metals (FMG) fell 1.70% to $19.06, BHP Group (BHP) fell 1.4% to $45.20. Mineral Resources (MIN) added 1.2% to $54.72.

The weaker Chinese economic data has taken some of the heat out of the crude oil price rally after it climbed by 3% on Friday above $110 p/b. Woodside Petroleum (WPL) added 0.36% to $30.51. Santos (STO) added 0.25% to $8.07. Bucking the trend, Beach Energy (BPT) fell 0.46% to $1.63. 

The IT sector has built on Fridays almost 7% rally led by Afterpay owner Block (SQ2) which added 3.76% to $119.95. Life 360 (360) added 4.56% to $3.67, XERO (XRO) added 3.4% to $87.02, Appen (APX) added 3% to $6.87 and Seek (SEK) added 2.8% to $25.51. ZIP (ZIP) fell 2.78% to $0.96c and Tyro Payments (TYR) fell 3.1% to $1.08.

A good day also for the ASX200 Financial Sector with all four majors trading higher, led by Westpac (WBC) which added 1.75% to $24.42, Commonwealth Bank (CBA) added 1.12% to $103.41. ANZ added 1.08% to $25.67, National Australia Bank (NAB) added 0.82% to $31.40. Macquarie (MQG) fell 1.49% to $180.38.

A mixed day for the Health Care Sector. Ramsay Health Care added 1.58% to $78.38, Resmed (RMD) added 1.08% to $28.81. Bio-Tech behemoth CSL fell 1.08% to $277.17 and Cochlear (COH) fell by 0.45% to $213.63.

Lithium stocks have enjoyed broad gains. Pilbara (PLS) added 4.86% to $2.59, Core Lithium (CXO) added 3.2% to $1.18, Lake Resources (LKE) added 3.4% to $1.45, Iluka Resources (ILU) added 0.81% to $9.90, Galan Lithium (GLN) added 0.7% to $1.39.

Elsewhere, pallet and container operator Brambles (BXB) has added 11.22% to $11.60 after take over interest from CVC Partners.

Turning to the charts, after Tuesday's capitulation, which took the ASX200 into our 7000/6950ish downside target, we moved to a neutral bias looking for a recovery towards 7200. We suspect near the 7200 level will be where the current bounce ends before another leg lower.

Source Tradingview. The figures stated are as of May 16th, 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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