Indices: Australian ASX 200
The US CPI for July came in largely as expected with US stocks reacting accordingly, the S&P500 edged up just +0.03%. The CPI surprises on the upside seem to be well and truly in the rearview mirror but investors are conscious that inflation remains well above the Fed’s 2% target.
The banks returned to form with a bang on Wednesday following CBA’s solid FY23 result with margins holding up extremely well despite the much-discussed increased competition. While the result may not have been outstanding there was nothing not to like from margins to dividends and even a surprise $1bn buyback which illustrates their strong capital position and confidence by the board.
We’ve been looking for the $A to recover through the 2H primarily because we are expecting an economic recovery from China and an eventual decline by the $US as bond yields reverse lower however on reflection when we consider the above 3 points it’s easy to comprehend why the $A is in the proverbial naughty corner.
Monday was a quiet day at the office courtesy of no major leads from overseas indices following the benign US Jobs Report and NSW Bank Holiday. The ASX200 ultimately closed down -0.2% with winners marginally outstripping losers but the influential major banks and miners found themselves on the wrong side of the ledger weighing on the index.
US indices slipped lower last week weighed down by the US ratings downgrade, earning misses from stalwart Apple Inc (AAPL US), and what felt like some general profit-taking across the high-flying tech sector .
Volatility is back in town which sounds like an old rock classic from the 1970s. The VIX Index has already surged more than 30% this week but when we look back at what happened back in 2011 when S&P downgraded US debt the current move hardly registers.
A “rich” market doesn’t digest bad news overly well and that was certainly apparent yesterday when a pretty innocuous and arguably outright weird downgrade of US credit from AAA to AA+ by Fitch wobbled global equities e.g. The ASX200 fell -1.3%, Japan’s Nikkei -2.3%, the Hang Seng -2.5% while during their overnight trading, the US S&P500 futures fell up to -1%.
The ASX200 rallied to fresh 5-month highs last week courtesy of particularly strong performances from the Energy and Tech Sector but gains were broad based with all 11 sectors closing in positive territory. August commences on Tuesday and while it will kick off with the RBA decision we believe most of the tone of the market over the coming weeks will be dictated by reporting season.
Thursday saw the ASX200 soar to levels not enjoyed since mid-February, for all the doom & gloom that pundits have been pedalling through 2023 the local index is now only 2.2% below its all-time high. The recent rally has been fuelled by hopes that we may see a pause/end to interest rate hikes by the RBA.
