In the words of Led Zeppelin “the song remains the same” as yet again when the ASX200 threatens to test its all-time high the selling emerges – it’s only been 4-weeks of rotation between 7000 and 7100 but it certainly feels longer. The index may have only slipped -0.5% on Thursday but the selling was broad based with over 70% of stocks closing down with losses focused in the tech and property names, fortunately the resources had a great day otherwise the losses would have been steep – BHP Group (BHP) led the way rallying over +2%.
China delivered more negative rhetoric towards Australia yesterday as the global superpower suspended a key agreement for regular dialogue, it appears in retaliation to Scott Morrison’s decision to scrap Victoria’s belt and road initiative – this maybe more handbags at dawn by politicians but unfortunately we have more to lose and China traditionally plays a long game. Interestingly while we don’t anticipate any good news short-term the $A was little impacted after a knee jerk drop and its actually trading higher this morning. i.e. China trade hassle is already “old news”.
MM closed out our US tech exposure in our Global Macro ETF this week as technical sell signals were generated with our target a retest of early March lows, importantly not a major move considering the post COVID advance. However unlike household names like Amazon (AMZN US) and Google Alphabet (GOOGL US) who made fresh all-time highs in recent weeks the Australian IT Sector has languished at best with over 85% of the index down year-to-date, if we are correct with regards to the US there could be more pain on the menu locally.
Overnight US stocks enjoyed a solid across the board bounce with the S&P500 finally closing up +0.73%, the SPI futures are calling the ASX to open up ~20-points this morning with resources again looking strong e.g. BHP Group (BHP) closed up 55c in the US.
No major change, MM remains cautious the ASX200 around the 7000-7100 area
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