The ASX200 said goodbye to August with another choppy session around the 7000 level, last month may have seen an attempt to break both under 6900 and above 7100 but come the 31st more than half of the month’s action unfolded close to the psychological 7000 area. Under the hood, it was a very different story at times as stock/sector rotation remains the main game in town after an interesting reporting season that saw more beats than misses but an underlying cautious tone towards future earnings– hardly surprising when we consider the macro events of the last few years. Wednesday saw over 60% of the ASX200 advance but losses primarily across the large cap resources space was enough to drag the index slightly lower:
- Winners: National Australia Bank (NAB) +2%, REA Group (REA) +2.7%, Xero (XRO) +3.7% and TPG Telecom (TPG) +1.5%.
- Losers: Woodside Energy (WDS) -4.5%, Fortescue Metals (FMG) -2.8%, BHP Group (BHP) -2.8% and a2 Milk (A2M) -3.1%.
The last few days have seen decent pullbacks in commodity prices and it would be easy to jump to the conclusion that we have turned the page in another new chapter of sector rotation, remember new themes are unfolding significantly faster than over the last decade i.e. moves from say resources to banks that would have taken 12-months to evolve previously are now taking just a few weeks. However, it’s important to remember that equity markets can often become a touch distorted at both the end and start of each month due to the likes of book squaring and capital inflows:
- Yesterday’s moves felt like some end-of-month squaring off as none of the days mentioned winners closed out the month with noticeable gains and two fell by over 5%, conversely of the losers all 4 ended August higher with 3 enjoying stellar gains.
Today we are going to evaluate whether MM believes that September will see underperformance from the Resources Sector as higher bond yields become priced into equities or if we feel the last few days have simply been some reversion into month end following the dramatic moves post Jackson Hole.
MM is neutral to mildly bearish the ASX200 around the 7000 area
Add To Hit List
