The ASX200 ended its 4-day rally on Thursday, with 65% of the main board closing lower after the US Fed held interest rates in its first meeting under new Chair Kevin Warsh, but signalled that tightening may be necessary to rein in inflation. It was a relatively muted session for the local bourse with only five stocks moving by more than 5%, although they were all in the losers' corner, primarily from the gold space.
The ASX 200 fell away throughout the session as Federal Reserve policymakers under new chair Kevin Warsh signalled the chance of a rate hike later this year, hitting tech, financials and rate-sensitive growth names. Defensives held up best, with Consumer Staples and Healthcare the only sectors to post a meaningful gain, while Energy, Materials and IT led the market lower. Oil extended its slide as the US-Iran deal on reopening the Strait of Hormuz raised hopes for a quick return of Gulf supply, while gold and iron ore stayed under pressure from firmer US rate expectations underpinning a rise in the $US.
The ASX 200 enjoyed another solid performance on Wednesday, again reversing higher from early weakness to end the session up +0.6%, at a 2-month high and only a few points below the psychological 9000 level. It was a clear “risk on” session with only the defensive-oriented consumer staples and utilities sectors closing lower, along with the energy sector, which was weighed down by crude's inability to recover any of its recent ~15% drop over the last five days. From a points perspective, it was the heavyweight financials and miners that performed the heavy lifting, a very encouraging combination for the bulls.
The ASX shook off a weak start to finish firmly higher today, extending its recent recovery as investors continued rotating out of energy and into resources, financials and growth exposures. The market opened lower before steadily improving through the session, with buying increasing into the afternoon as optimism around US-Iran agreements accelerated with a proper framework and further details of the deal expected imminently.
The Reserve Bank of Australia (RBA), as expected, left interest rates at 4.35%, although Michelle Bullock warned that inflation remains too high. The central bank now faces a delicate balancing act, weighing stubbornly high inflation against mounting signs of softness across the labour market, consumer spending and housing sectors.
The ASX200 put on a fighting performance today, gapping down ~80pts on the open but recovering every last point of the deficit to finish mildly higher. The key news for the day was the Reserve Bank leaving the cash rate unchanged at 4.35%, pausing after three consecutive hikes this year.
The ASX 200 rallied another +1.3% on Monday, following reports that the US and Iran have agreed on the terms of a peace deal. The index extended its advance for June to more than +2%, taking it back within ~3% of its February all-time high, ironically just before the US-Iran conflict erupted. Gains were fairly broad-based, with 70% of the main board advancing.
The ASX built on Friday's strength and rallied again today, with the local bourse embracing news of a US-Iran agreement to reopen the Strait of Hormuz and removing the biggest macro risk hanging over markets in recent months. The rally was broad, but Materials did the heavy lifting.
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