HomeReportsMacro Monday: Can Lithium stocks recover after an awful…
It has traditionally been very hard to track the lithium (Li) price closely as sales are conducted via contracts and rely on a benchmarking service to provide a reference price, however, the industry is edging towards more transparent auctions as the likes of Pilbara (PLS) and more recently Albemarle Corp (ALB US) plan to sell more product using an this clearer approach. Perhaps they should be careful what they wish for as Li tests new multi-year lows! Australia’s 6th largest export has plunged over 80% in price since late 2022 causing havoc amongst the producers as the market has gone from fears of shortages to a glut in inventories. This year alone has witnessed some dramatic underperformance from Li related names which has weighed on the broader Resources Sector.
The ASX200 fell 0.6% on Wednesday, its largest decline in two months, as the market spent its 26th day rotating in a relatively tight 200-point range. However, while the index has been very calm for almost six weeks on the stock level, it's been a very different story with the return of tariff uncertainty and the ever-changing perceptions around the future path for interest rates, spiking volatility across stocks – it’s just been a case of rotation between sectors instead of between stocks and cash.
A weaker session today as Copper tariff news created some volatility amongst the resources, gold stocks were weak, while rate sensitive areas like property felt the pinch from the RBA reticence to cut rates yesterday.
The ASX200 had plenty of reasons to fall on Monday, but again, come 4 p.m., the bears were left disappointed: Trump is throwing around tariffs again like confetti, the Dow dropped over 400 points, and the almost guaranteed RBA rate cut failed to materialise.
The ASX200 closed down 0.2% on Monday, largely shrugging off weakness across US futures markets as Trump’s tariff deadline moved ever closer. Over 40% of the main board managed to close higher, with most of the major movers on the day being news-led.
No trade in the US on Friday night (Independence Day), so a quiet session to kick things off locally ahead of some key data points this week. The RBA should cut rates tomorrow which would be their first back-to-back move in 6-years, while we await the tariff deadline in the U.S on Wednesday night.
Donald Trump’s second presidency has been volatile, and it's still less than six months since his inauguration. When Congress approved Trump’s budget mega bill on Thursday, it was the latest of the milestones for the president as he follows through on his unconventional election promises.
The ASX200 advanced another 1% last week, closing above the psychological 8600 level for the first time. The healthcare, real estate, and materials sectors all closed up around 3%, while the financial sector was the weakest over the five days, closing down 0.7%. For the market to extend the recent gains, it will need to shrug off high valuations and lack of earnings growth, although, as we saw last week, the resources stocks can do some of the heavy lifting after experiencing a tough 18 months.
A quiet end to a solid week for stocks, chalking up a positive move to kick off FY26. The FY25 trend of buying certainty at any price has taken a (slight) knock, with sectors and stocks representing better value attracting more flows this week.
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