Importantly good luck if your punting on the Melbourne Cup &/or RBA today, I’m sure both will create plenty of noise, news and volatility up and down the country.
The ASX200 bounced 0.6% yesterday as broad-based gains offset weakness in the Banking Sector, the market clearly hasn’t read the seasonality script i.e. this time of year the banks usually rally following the results and looming dividends of 3 of the “Big 4 Banks” in the coming weeks. Unfortunately on this occasion Westpac’s (WBC) result simply wasn’t good enough and the stock was smacked over 7% – more on this later.
Monday saw some healthy intra-day strength within the iron ore names and we feel they are now at or very close to a low hence making them excellent risk / reward buys – probably the question I’ve heard the most over recent weeks has been “when should we buy BHP, RIO, FMG etc” , MM thinks the answer is basically now. If the banks can regain their mojo sooner rather than later then we feel the ASX will be looking good into Christmas assuming there are no hand grenades lobbed in the market by the RBA at 2.30pm today, after which of course the nation has just 30-minutes to digest the news before casting there eyes to the nearest TV screen to watch 24 horses run 3200m in around 3.3 minutes – apparently, Incentivise is going to win!
As we’ve said a number of times over recent months interest rates are going up with the only question being when, for many mortgage holders it will be the first time they’ve ever endured such an event which is no surprise considering the RBA has only ever cut, or left rates unchanged, for more than a decade! We feel a move back towards 1.5% for the Cash Rate into say 2025 is built into stocks its only if inflation ramps up and rates follow suit that stocks are likely to get very scarred. Fortunately for stocks there is currently so much cash around and corporate balance sheets are in excellent shape that Moody’s credit ratings upgrades are at a 20-year high.
Overnight US stocks were mixed with tech struggling to make meaningful headway but the small cap Russell 2000 Index rallied over 2%, encouragingly we are more correlated to the later. The SPI Futures are calling the ASX200 to open up 0.2% today but the RBA are likely to add some serious spice to the mix at 2.30pm.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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