ASX Trading Wrap: Pilbara leads lithium sell-off, Woodside leads an oil rally, iron ore rebounds
Rene Anthony
As has been much of the story throughout 2022 thus far, commodities were a talking point on the ASX this week, with oil stocks leaping higher alongside iron ore names, but lithium stocks faced a brutal sell-off as some started to question the industry outlook.
Which shares excelled?
Beach Energy (ASX: BPT) and Woodside Energy Group (ASX: WDS) have been two of the biggest winners this week, helping prop up the ASX. Oil prices have been on the march higher over recent weeks, hitting their highest level in nearly three months as the sector runs hot.It been a similar fate for iron ore stocks including Fortescue Metals Group (ASX: FMG), BHP (ASX: BHP), and Grange Resources (ASX: GRR), which all leapt higher this week as commodity sentiment improves. One of the catalysts for the move was news that Shanghai would be lifting its lockdown this week, signalling what some might presume could be a ramping-up of activity across the Chinese economy. With iron ore a key steel-making ingredient, the sector enjoyed a strong week.Similarly, South32 (ASX: S32) has also been charging higher this week, spurred on by the same broad-based buying for the other commodities mentioned above. The company has also been buying back its shares recently, providing a base for the share price to rebound.On the back of all the positive sentiment swirling around resources stocks - minus lithium, which We'll get to shortly - Monadelphous Group (ASX: MND) has been a winner this week. One of Australia leading engineering groups, the company is directly exposed to projects in the commodities sector, which means positive sentiment often provides some support for the name.In the agriculture space, Cobram Estate Olives (ASX: CBO) and Costa Group Holdings (ASX: CGC) are both enjoying a solid week. Although China has proved a concern for certain food-related stocks, as have stronger fertiliser prices, these stocks have turned to favour as they become price-makers, passing on costs to customers.Telco stocks also had a positive week, with Telstra (ASX: TLS) proposal to share mobile infrastructure networks with TPG (ASX: TPG) offering a catalyst to bring the sector to life. Macquarie Telecom (ASX: MAQ) was one of the strongest movers in light of the sector-wide move, even though it isn't part of the proposed deal.
Which shares dragged on the market?
One of the biggest stories across the market this week, lithium stocks were pummelled on Wednesday after the sector received a sharp downgrade from Goldman Sachs. The investment bank has called time on the lithium bull market - at least for now - arguing that supply is expected to significantly outstrip demand in the short-to-mid-term.
Goldman Sachs is calling a major retreat in lithium prices over the next two years, and that has weighed on stocks like Pilbara Minerals (ASX: PLS), Sayona Mining (ASX: SYA), Allkem (ASX: AKE), Ioneer (ASX: INR), Core Lithium (ASX: CXO), and a host of other names from the sector. Firefinch (ASX: FFX) also hit a wall today, but that followed the demerger of its Mali lithium project.Origin Energy (ASX: ORG) stunned onlookers this week when it downgraded its guidance for FY22, and also withdrew its earnings guidance for FY23. The nation second-largest power producer, Origin has been impacted by soaring coal prices fuelled by local coal plant outages and the war in Ukraine. Management expects a cut in output at the company Eraring power station, which would also leave it exposed to higher spot electricity prices in meeting customer demand. Sticking with the coal theme, Yancoal (ASX: YAL) was one of this week underperformers. However, the company disappointing week followed a peculiar set of events where its major shareholder is trying to force a takeover. Yankuang Energy, which is a Chinese state-owned enterprise, is trying to buy all outstanding shares in Yancoal at a discount of more than 15%, despite tailwinds bringing in record profits and cash at this time.Suncorp (ASX: SUN) shares came in for heavy selling earlier in the week, with the pull-back sparked by a broker downgrade. The insurance and diversified financials firm was on the receiving end of a critical analysis from Morgan Stanley, with the bank citing the risks associated with its exposure to weather events related to climate change And lastly, Imugene (ASX: IMU) and Megaport (ASX: MP1) were out of favour this week, while Seven West Media (ASX: SWM) encountered its second-straight week on the list of the worst performing stocks despite no price-sensitive news.
We'll be back next week with another Weekly ASX Trading Wrap Up - until then, have a great week!
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