The ASX 200 rounded out the week on a bullish note, posting back-to-back weekly gains to remain effectively flat for the year. The index added 0.64% on Friday to settle at 8,716.60, a weekly gain of 0.4% that followed a 0.2% gain in the prior period.
Friday’s session was welcome relief for many of the sectors, as Info Tech led the charge with a 2.23% gain to sit 1.5% lower on the week. Industrials added 0.87%, Financials recovered 0.49%, and Energy edged up 0.22%, while Materials ended the session marginally lower at -0.03%, weighed down by continued weakness in lithium stocks.
Leading into the weekend
The individual leaders were a mixed bag, as West African Resources (ASX: WAF) topped the index with gains of 5.43%, Mercury NZ (ASX: MCY) added 5.26%, Lovisa Holdings (ASX: LOV) bounced back 5.04%, while The Lottery Corporation (ASX: TLC) gained 4.64%.
Among the technology names, Light & Wonder (ASX: LNW) rose 4.51, Pro Medicus (ASX: PME) added 4.50% to close above it’s 200 day SMA, and WiseTech Global (ASX: WTC) gained 4.25%. Magellan Financial Group (ASX: MFG) rounded out the top performers with a 4.39% gain to close out the week at $8.56.
Moving lower
Friday’s laggards were topped by Sunrise Energy Metals (ASX: SRL), down 11.05%, whilst Maas Group Holdings (ASX: MGH) fell 6.65% on the pulled Firmus IPO, PLS Group (ASX: PLS) shed 5.41%, and Electro Optic Systems (ASX: EOS) pulled back 4.25% to $10.13. Rounding out the list were Liontown (ASX: LTR), down 3.75% to $0.77, and Paladin Energy (ASX: PDN) which fell 3.67%.
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Rotation Beneath the Surface
Rotation under the index level continues to be a theme. The rebound in technology names like PME and WTC reflects a renewed willingness to step back into sold off names, with risk appetite growing, albeit slowly.
The lithium story on the other hand is applying pressure to a pocket of the Materials sector. Chinese lithium carbonate futures fell after the local holiday, down 4% at the open, to sit 44% down from early May highs. This is ripping through valuations at lithium exposed names, with PLS and LTR both on the list of laggards, and both down 28% and 34% in the past month respectively.
Two consecutive weeks of modest gains provide at least some stability, but this is a case of consolidation rather than a breakout. The small-cap segment of the market continues to lag, which is a feature of risk off markets where capital moves toward liquidity and quality.
Looking ahead, the macro backdrop of interest rates, oil prices, and the health of China’s economic recovery (particularly as it relates to commodity demand) are likely to be the main drivers of momentum. Then we have the upcoming earnings season about to get underway Stateside that could well set the tone for various sectors globally.
