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The ASX200 rallied +0.6% on Monday despite an average day on the reporting front which saw Fortescue (FMG) -5.1% and NEXTDC (NXT) -2.6% both fall after delivering their earnings numbers/forward guidance. However, on the day there were some very influential names in the winner’s enclosure such as CSL Ltd (CSL) +1.7%, BHP Group (BHP) +1.2%, and Commonwealth Bank (CBA) +1.2% which when combined with over 60% of the main board advancing was enough to send the index higher.
There was no major fallout post-Jackson Hole with US S&P500 futures up around 0.25% during most of our trading session while Asian indices started to embrace Beijing’s moves to prop up their ailing economy and markets:
- China has asked for some funds to avoid Net Equity Sales to boost markets.
- Over the weekend the Ministry of Finance announced a 50% cut of stamp duty on stock trades to rekindle investors’ interest in stocks.
The press has been quick to throw cold water on the efforts of Xi Jinping et al with one of Bloomberg’s current headlines illustrating the mood “Markets show China Needs a Stimulus “Bazooka” to Woo Investors” but we believe the time is approaching where the arm wrestle will move in Beijing’s favour. Asian indices closed higher on Monday although they were well off their highs, we believe they are now “looking for a low” e.g. the Hang Seng closed up +1% after being up around +3.5% earlier in the session. Also, a few of the local resources stocks appeared to find some buying although in most cases the recent downtrend remains intact.
- The ASX200 is poised to open up +0.4% this morning after a strong session on Wall Street saw the S&P500 close up +0.6%.
This morning we’ve briefly looked at 3 gold stocks, 2 of which we own in our Flagship Growth Portfolio , which occupied the trifecta of top performers in the ASX Materials Index on Monday. Gold is inversely correlated to short dated bond yields with Mays high by the precious metal above $US2,050 coinciding almost to the day when the US 2-Years started to climb towards the ~5% area.
- We are looking for a top by US 2-Years around 5% which is bullish for precious metals.
