Global markets were higher overnight as technology stocks fuelled a rebound on Wall Street after the United States temporarily eased curbs on China’s Huawei Technologies, raising expectations that the two countries would work toward a trade deal.
Stock in Focus: Lynas (LYC:ASX)
Shares in rare earths miner Lynas rose sharply after it announced at its investor day that it had abandoned plans to continue accumulating low-level radioactive waste at its Kuantan rare earths processing hub and build a processing plant in Western Australia.
Bloomberg also noted China President Xi Jinping visited a rare-earths facility, sparking speculation the materials could be the next pawn move by China given the US relies on China for about 80% of such imports. Lynas shares closed 14.9% higher, before entering a trading halt in the afternoon.
We have seen Lynas as an interesting high-risk play on the electric vehicle theme, given the importance of rare earths for electric vehicles.
We currently have a BUY (High-Risk) recommendation on Lynas.
Australia & New Zealand Market Movers
The Australian share market (ASX 200 index +0.37%) added to gains yesterday as the ASX recovered from a steep loss at the open after Reserve Bank of Australia governor Philip Lowe signalled the cash rate would be cut next month. RBA minutes from its May meeting showed that members recognised the need for a rate cut should there be no further improvement in the labour market. Banks rose for a second day after the Australian Prudential Regulation Authority proposed lowering the rates used to calculate whether a stressed borrower can meet their repayments (from the current 7 per cent serviceability buffer on home loans).
In stock news, James Hardie shares rose after reporting a 57% rise in net profit after tax to $US228.8 million ($330 million) for the year ended March 31. However, the building products company warned it was bracing for a weaker housing market in Australia.
The New Zealand market retraced yesterday (NZX 50 index -0.18%) led lower by Chorus, after investors were spooked by potentially stricter regulation of its ultrafast broadband network than anticipated. The Commerce Commission issued several papers seeking feedback on the new regime for fibre networks, including its current thinking on key issues such as the cost of capital and what is included in Chorus's regulated asset base. Outside the benchmark index, Plexure Group jumped 15% after reporting a 44% increase in revenue and a net operating cash inflow. Tower also rose as the insurer returned to profit in its first-half earnings result and lifted annual guidance on increased gross written premium and a reduction in claims costs.
3 Things Markets Will be Watching this Week
- Mini reporting season across Australasia sees a number of Aussie & Kiwi stocks make earnings announcements next week.
- Trade War headlines between the US & China are likely to remain in focus.
- Minutes from the last RBA meeting are released on Tuesday.
Have a Great Day,