ASX200 Afternoon Report May 31st 2022

The ASX200 is trading 37 points lower at 7249 at 3.00 pm Sydney time, with most sectors trading lower.

Behind today's sell-off, U.S higher yields surged after a red-hot German inflation print and hawkish comments from Federal Reserve Governor Waller, who stated, "In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2% target."

Throwing fuel on the smoldering bond market bonfire, the price of crude oil rallied above $118 per barrel today as EU leaders moved closer to banning Russian oil imports just as the driving season in the U.S kicks off and a broader re-opening commences in China.

After a three-day rally, the interest rate sensitive IT Sector has given back a chunk of its hard-fought gains. Zip (ZIP) fell 5.13% to $0.93c, Life 360 (360) fell 4.58% to $3.65, Tyro Payments (TYR) fell 4.85% to $1.08, EML Payments (EML) fell 4.08% to $1.53, Seek (SEK) fell 3.6% to $24.47. Afterpay owner Block (SQ2) fell 3.2% to $125.75 and Megaport (MP1) fell 3.2% to $7.48.

A 2.4% decline in building approvals in April has weighed on the share price of the big banks. ANZ dropped 1.90% to $25.28, National Australia Bank (NAB) fell 0.85% to $31.58, Westpac (WBC) fell 0.9% to $23.99, and Commonwealth Bank (CBA) fell 1.1% to $105.38.

The Materials Sector is trading in positive territory after the release of better-than-expected Chinese PMI data and after the latest Chinese stimulus package prioritising production and consumption ahead of consumption – measures supportive of commodity prices.

Mineral Resources (MIN) added 1.99% to $63.95, South 32 (S32) added 1.75% to $4.97, Oz minerals (OZL) added 1.3% to $24.26, Fortescue Metals (FMG) added 1.3% to $20.11, Rio Tinto (Rio) added 0.8% to $114.66. BHP Group (BHP) fell 0.2% to $44.83.

Energy companies have lifted following the rally in the price of crude oil. Beach Energy (BPT) lifted 2.9% to $1.69, Copper Energy (COE) added 1.9% to $0.27c, Origin Energy (ORG) added 1.2% to $6.90. Santos (STO) added 0.43% to $8.23. Woodside Energy (WDS) fell 1% to $29.95.

A strong session for Lithium miners as Lake Resources (LKE) added 2.7% to $1.53, Liontown Resources (LTR) climbed 2.5% to $1.43, Core Lithium (CX0) added 2.2% to $1.41, Vulcan Energy (VUL) added 2.15% to $8.09 and Galan Lithium (GLN) added 1.63% to $1.56.

Providing the ASX200 can hold above support (formerly resistance) at 7200, the ASX200 has negated the short-term downside risks, and, we look for the rally to extend towards the 200-day moving average at 7320.

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