December Delight: ASX Continues Santa Rally

Good Evening,

Welcome to Equity Espresso’s Daily Recap. The Santa rally continues, with the Aussie market higher for the third day running, led by the Tech sector. RBA Governor Michele Bullock believes Australia isn’t falling behind global peers when tackling inflation. Let’s jump in.

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The Recap

The ASX 200 index finished higher for the third day running, gaining 36.3 pts. or 0.50% to close at 7,235.30. The Santa rally appears to be in full effect, with the main index now up by over 2.00% in December after November’s 4.52% gain.

It was almost a clean sweep on the boards, with Technology (+2.12%) and Consumer Staples (+1.39%) leading the charge of the ten sectors to finish higher. Xero (+4.33%), Wisetech Global (+2.93%) and Woolworths (+2.08%) were some of the big gainers.

Materials finished lower by the barest of margins (-0.1pts.), Iron Ore Futures continued their resurgence, trading at 18-month highs of US$137.50. Oil prices steadied just above a five-month low with oversupply concerns in focus. While Bitcoin saw its largest one-day decline in four months to currently trade at around US$41,500.

RBA Governor Michele Bullock doesn’t believe Australia is falling behind other nations when fighting inflation. “I think we are trying to make sure that we slow the economy enough to bring inflation down to our target band.”, Bullock said at the Australian Payments Network Summit today. She went on further to say that she expects inflation to return to the RBA’s 2 to 3% target band in the next couple of years, provided inflation expectations don’t get “out of control”.

ASX Indices

ASX Sector Performance

Economic Data
  • Australia's Westpac-Melbourne Institute Consumer Sentiment index rose by 2.7% to 82.1 in December from 79.9 in December.

  • Japan’s Producer Prices rose by 0.3% YoY in November, down from a 0.9% gain in October but beating expectations of a 0.1% rise.

  • According to a NAB survey, Australian Business Confidence decreased to -9 points in November from -3 points in October, well down from historical averages of 5.10. ⬇️ 

Wall Street

U.S. markets edged higher again on Monday to continue to post fresh yearly highs, with the S&P 500 (+0.39%) leading the way, followed by the NASDAQ (+0.20%) and Russell 2000 (+0.15%). Markets have all but priced in that the Federal Reserve is done with its rate hike cycle ahead of this week’s meeting on Wednesday.

Macy’s stock jumped by more than 21% after reports surfaced of a potential $5.8 billion by two investment firms, Arkhouse Management and Brigade Capital Management. Doordash (+1.50%) rose after news that it would enter the NASDAQ-100 index.

Oracle shares fell by over 8% in after-hours trading after reporting quarterly earnings after the bell, which missed revenue expectations.

  • EPS: $1.34 p/s adj. vs. $1.32 p/s adj. expected

  • Revenue: $12.94 billion vs. $13.05 billion expected

Oracle grew its revenue by 5% year-over-year and guided for between 6% to 8% growth in the upcoming qtr.

U.S. Indices

Fear and Greed Index

Outlook

A busy evening of economic data globally with CPI data in the U.S. the key item to watch over the next 24 hours:

  • U.K Unemployment Rate (Oct), est. 4.2%

  • U.K Employment Change MoM (Oct)

  • German ZEW Economic Sentiment (Dec), est. 8.8

  • U.S. CPI YoY (Nov), est. 3.1%

  • U.S. Core CPI YoY (Nov), est. 4.0%

Futures markets are currently.

Some of the companies reporting quarterly earnings tonight include Johnson Controls International and SatixFy Communications.

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Quick Singles

🪃 Local News

  • The Federal Government has announced a new strategy to fix what it says is a broken immigration system. The strategy aims to bring migration back to sustainable levels, as overseas migration to Australia increased by 103% to 681,000 in the 12 months to March 2023.

  • Former Westpac executive Brian Hartzer joined Quantium Health, a data analytics and AI company, four years after resigning from the bank, in November 2019.

🌏 Around The Globe

  • Arm CEO Rene Haas says the one thing that worries him the most is humans losing capability over machines. Going on further to say, “You need some override, some backdoor, some way that the system can be shut down.”

  • U.S. health insurer Cigna has dropped its bid to acquire rival Humana after the companies failed to agree on a price. Cigna now plans to buy back $10 billion worth of shares.

  • Honeywell International, the maker of jet engines and gas detectors, has agreed to acquire Carrier Global Corp.'s security business for $5 billion.

  • The U.S. Department of Energy has announced plans to purchase up to 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR), scheduled for delivery in March 2024. The Department wants to take advantage of lower prices after receiving an average price of about $95 per barrel last year.

  • Ethiopia is about to become the next African country to default on its debt after the government said it could not pay a US$33 million coupon due on Monday due to the nation's “fragile external position”.

  • Japanese tech giant Rakuten plans to launch its own proprietary artificial intelligence language model to improve operational efficiencies within its businesses.

  • Azerbaijan says it’s on track to double its natural gas exports into Europe by 2027, with exports rising to 12 billion cubic meters (bcm) this year from 8 bcm in 2021.

  • Grain shippers sailing from the U.S. to Asia are taking longer routes to avoid delays and high transit fees due to drought affecting the Panama Canal.

Markets
ASX Company Movers
Commodity Prices
Bond Prices
ETF Watch

ASX News

🗞️ Company Announcements

  • Compumedics Limited (CMP) announced that it has received two further MEG sales orders from China amounting to $9.3 million, with the new systems expected to be shipped and installed in FY25.

  • Charter Hall Retail REIT (CQR) will sell $225.5 million of its shopping centre assets, including the Southgate Square in South Australia ($91m) and Rosebud Plaza in Victoria ($134.5m)

  • Electro Optic Systems (EOS) has appointed Dr Andreas Schwer as its new Managing Director following his appointment as Chief Executive in August 2022.

  • Elders (ELD) has agreed in principle to cease an agreement with Rural Bank, a Bendigo and Adelaide Bank division. The agreement with Rural Bank contributed approximately $11.3 million in gross margin to Elders Financial Services’ business.

  • Healius (HLS) has raised $33.5 million from retail investors as part of a capital raise at $1.20 per share.

  • Imugene (IMU) announced a strategic collaboration with Neolmmune Tech to evaluate Imugene’s allogeneic CAR T, azer-cel, combined with NIT’s proprietary immune T cell amplifier, for cancer treatment.

  • Incitec Pivot (IPL) has appointed Mauro Neves de Moraes as its new chief executive and managing director and will commence on January 22, 2023.

  • Johns Lyng Group (JLG) has agreed to provide building repair services to New Zealand company Tower Insurance, marking the first agreement signed by JLG with a major national insurer in the country.

Social Media

 📱 Post of The Day

Broker Research

Latin Resources

Code: LRS | Market Cap: $527m  | Current Price: $0.19
Price Target: $0.52 | Sector: Materials | Broker: PAC Partners

Overview

Latin Resources Limited (LRS) is an Australian-based mineral exploration company with several mineral resource projects in Latin America and Australia.

Latin’s flagship project is the Salinas Lithium mine in the Jequitinhonha Valley district of Minas Gerais, Brazil. Latin provided a resource update for the Colina Deposit and Fog’s Block last week.

Broker Highlights

  • An increase of the Colina resource by 41%% to 63.5mt @ 1.3% Li2O for 2.06mt of LCE.

  • Including the Fog’s Block prospect, Salina’s project now contains 70.3mt @ 1.27% Li2O for 2.2mt of LCE.

  • Drilling continues on site with 16 drill rigs to be in operation early 2024

    and drilling into the foreseeable future.

  • Resource growth is expected to come from Colina extensions.

  • The upgraded resource will assist in finalising the DFS, which is set for

    completion mid-2024.

Recommendation 

The broker believes that Salina has grown into a top-tier asset and that the MRE will continue to grow further and push 80-100mt with ongoing drilling exploration into 2024. The successful ramp-up of Sigma Lithium shows that Brazil-based Lithium projects can be brought to market relatively quickly and cheaply.

The broker maintains a Buy recommendation and increases their price target to $0.52 per share from $0.50.

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Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Question: What was the most viewed article on Wikipedia in 2023?

Answer: Chat GPT, with over 49.5m views, was number 1 during the year. With Deaths in 2023 (42.7m), 2023 Cricket World Cup (38.1m) and Indian Premier League (32.0m) trailing behind. The 2023 Cricket World Cup was the most popular poll response (50%), followed by the correct answer (31%).

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of December 6

Weekly Movers ⬆️ 

  • Peninsula Energy (PEN) +1.62% to 7.03%

  • Strike Energy (STX) +0.85% to 6.05%

  • Deep Yellow (DYL) +0.69% to 7.15%

Weekly Movers ⬇️ 

  • Paladin Energy (PDN) -2.19% to 2.20%

  • Treasury Wines (TWE) +0.81% to 1.24%

  • Baby Bunting (BBN) -0.71% to 1.24%

📊 Broker Ratings

What do the brokers have to say?

  1. Costa Group (CGC) - Downgrade to Neutral from Outperform (Macquarie)

  2. Eroad (ERD) - Downgrade to Hold from Buy (Bell Potter)

  3. Smartgroup Corp (SIQ) - Downgrade to Hold from Add (Morgans)

  4. Virgin Money UK (VUK) - Upgrade to Outperform from Neutral (Macquarie)

Detailed broker summary of Smartgroup

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.