The ASX200 needed a storming return to form on Thursday & Friday to end the week up just +0.3%, as news around the US-Iran War finally supported local stocks. The choppy week saw early negative sentiment push the index down to a fresh 7-week low, testing below the 8500 level before some bargain hunting returned. The major miners led the market’s recovery, reflecting an improvement in risk appetite given the sector’s strong leverage to global growth expectations, although both BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) still finished the week modestly lower.
Refreshingly, moves in both the winners’ and losers’ lists were again largely driven by company-specific news flow, although unfortunately, most of the sharp reactions came on earnings misses, while lithium stocks continued to enjoy strong momentum on the upside.
Winners: Guzman Y Gomez (ASX: GYG) +17%, Computershare (ASX: CPU) +9%, Domino’s Pizza (ASX: DMP) +8%, ALS Ltd (ASX: ALQ) +8%, IGO Ltd (ASX: IGO) +8%, Mineral Resources (ASX: MIN) +8%, and Treasury Wine (ASX: TWE) +6%.
Losers: Tuas Ltd (ASX: TUA) -62%, Predictive Discovery (ASX: PDI) -23%, Brambles (ASX: BXB) -23%, Elders Ltd (ASX: ELD) -18%, 4DMedical (ASX: 4SX) -10%, Eagers Automotive (ASX: APE) -10%, and Telix Pharma (ASX: TLX) -10%.
The main event of the week for us was the weak Australian unemployment figures out on Thursday, which brought into question how many hikes the RBA will deliver this year:
- The week commenced with triple-digit losses as rising oil prices and another sharp move higher in bond yields weighed heavily on sentiment as markets grappled with the prospect of a higher-for-longer outlook on rates.
- Also, weighing on investors was a triple set of bad news in the form of company and regulatory news, sending Brambles (ASX: BXB) -20%, Elders (ASX: ELD) -23%, and Tuas (ASX: TUA) -63%, all sharply lower.
- Tuesday then delivered an almost triple-digit gain on signs that the US-Iran peace talks were making progress.
- The roller-coaster ride continued with triple-digit losses on Wednesday, sending the ASX to a seven-week low as bond yields surged to multi-decade highs on war-driven inflation fears.
- The song remained the same on Thursday, with the index enjoying its best session in six weeks following positive leads from the US and a surprise jump in unemployment reduced rate hike expectations.
- Australian unemployment spiked to 4.5% in April, causing traders to sharply reduce bets on RBA rate hikes through 2026, helping rate-sensitive stocks.
- The ASX200 went into the weekend gaining optimism by improving reports on the Middle East and softening expectations for Australian interest rates.
In the week ahead, attention will turn to Australia’s monthly inflation data on Wednesday for further clues on the health of the economy and the likely path of interest rates. The release follows this week’s softer labour market report, which showed unemployment rising to its highest level since November 2021, warning the economy may be cooling faster than expected.
Overseas markets were firm on Friday night, but the US lost more than half its gains in the last hour of trade, although it still posted its 8th consecutive weekly gain, its best run since 2023. In Europe, the German DAX closed up +1.2%, still ahead of the EURO STOXX 50, which finished up +1%. In the US, the S&P 500 and NASDAQ both ended the session up +0.4%, off their highs but still delivering a strong weekly performance.
- The SPI Futures are calling the ASX200 to open down ~0.7% on Monday following Wall Street’s late pullback from highs.
