ASX 200 Afternoon Report, 7 September 2023

A dirt diggers' day to forget

The ASX 200 trades 93 points (-1.29%) lower at 7163 at 3.00 pm AEST.

A return to the dark days of mid-August as the ASX 200 felt the heat today from higher bond yields and a weak lead from Wall Street, following a hotter-than-expected ISM services PMI that contained worrying signs of pricing and employment pressures.

Defying market expectations for a fall to 52.4, the ISM services purchasing managers' index (PMI) rose to 54.5 in August from 52.7 in July, its highest reading since February. The prices paid sub-index increased to 58.9 from 56.8, and the employment component increased to 54.7 from 50.7.

In response to the ISM beat and hawkish European Central Bank (ECB) comments, US two-year yields closed 6bp higher at 5.02%, up 25bp from Friday's low that followed the softer-than-expected non-farm payrolls print for August. The probability of a 25bp rate hike in November, which we have flagged in recent weeks as being underpriced, is back up to 44%.

Mining investors see red

Returning to today's action on the ASX 200, it has been a day to forget for the dirt diggers, with iron ore, coal, gold, lithium and uranium miners drowning in a sea of red ink.

Starting with the iron ore behemoths, BHP fell 4.95% to $43.81 after going ex-dividend. Mineral Resourcess fell 2.69% to $71.83, Rio Tinto fell 1.92% to $113.75, and Fortescue's tough run of late continued as it fell 1.13% to $20.11.

The fallout from the NSW Treasurer's announcement yesterday that coal royalties will rise by +2.6% from July 2024 has seen Coronado fall 4.64% to $1.60, Whitehaven Coal fell 3.53% to $6.15, New Hope fell 2.44%, and Yancoal fell 2.25% to $5.00.

US yields weighs on gold price

The unrelenting rise in US yields has weighed on the price of bullion overnight as it fell below $1,920, which has impacted the ASX-listed gold stocks. Gold Road Resources fell 1.63% to $1.66, Perseus Mining fell 1.52% to $1.78, Northern Star Resources fell 1.3% to $11.04, and Silver Lake Resources fell 1.34% to $0.92c.

Despite the price of uranium climbing above $61 per pound, on track for a ninth straight week of gains, ASX listed uranium names have fallen today. Bannerman Energy fell 7.3% to $2.29, Silex Systems fell 6.8% to $3.37, Paladin Energy fell 4.05% to $0.89c, and Deep Yellow fell 3.43% to $0.98c.

In the lithium space, the takeover target Liontown Resources share price bucked the trend as it added 8.85% to $3.01 on speculation that a party is building a blocking stake to prevent Albemarle's takeover from going through. No help, however, for Allkem, which fell 3.44% to $13.82, Vulcan Energy fell 3.9% to $3.20, and Core Lithium fell 3.7% to $0.39c.

Besides a five-day trading window in late July/early August and two days in early July, the ASX 200 has spent the past five months trading sideways between 7370 and 7050ish. We see no reason for that to change in the short term and expect further range trading into the end of September.

ASX 200 daily chart