Indices: Australian ASX 200
The broad based US S&P500 closed marginally higher last week whereas the tech stocks slipped over -3% from their intra-week high following softer than expected results from Netflix (NFLX US)) and Tesla (TSLA US) i.e. you must deliver if you are priced for growth which was highlighted by TSLA and NFLX who both tumbled well over -10% from their recent highs.
The ASX200 surged +4.5% from last Mondays low as defensively positioned investors appeared to press multiple buy buttons after the US CPI print, standout gains were made by the Tech, Materials, Real Estate and Energy Sectors although with the exception of the Healthcare Sector all pockets of the market contributed to the markets best performance in 9-months.
The ASX put in a very disappointing performance on Monday reversing decent early gains to close down over -0.5%, only 61% of the main board finished lower but when heavyweight resource stocks fall along with average performances by the banks and CSL the index usually follows suit. However, the miners were the standout weakest link with BHP Group (BHP) -1.1%, RIO Tinto (RIO) -1.1%, Fortescue (FMG) -2% and South32 (S32) -3% all weighing on the index.
Over recent month we’ve been looking for short-dated bond yields to post fresh highs which unfolded according to the script, with the move dragging stocks lower as expected. If the next chapter of our roadmap is correct we should see yields form a top over the coming weeks which bar any economic calamities should prove very supportive of stocks.
The ASX200 failed to add to Tuesday’s euphoric gains following the RBA’s pause, the index gave back the vast majority of the previous day’s gains with over 60% of the main board closing lower. The financials weighed on the market with the “Big Four” ending down an average of -0.7% while the heavyweight major miners and CSL offered little hope to the bulls.
The RBA took centre stage at 2.30 pm on Tuesday and they happily opted to hit the pause button for the 2nd time in 4-months, perhaps hope does spring eternal, we’ve discussed our view over recent weeks that the market had become too hawkish and although it’s very early days we’re sticking with our peak interest rate target of 4.35-4.5%.
The ASX200 rallied +0.6% on the first trading day of July, under-the-hood things did not turn out as expected with the top-performing tech names being sold off even after a stellar Friday night by the heavyweight FANG+ names on Wall Street e.g. Locally we saw Wisetech (WTC) -2.9%, Technology One (TNE) -2.2%, and Xero (XRO) -0.9. The average gain of these 3 major Australian tech stocks in 2023 is +30% yet on Monday they opened on their highs following the strong session by US tech only to experience a rare day of strong selling to reverse lower.
Last week saw the ASX200 rallied solidly into the EOFY with the Tech, Real Estate and Consumer Discretionary Sectors leading the gains, following Wall Street moves on Friday night this morning is likely to be much of the same from a relative performance perspective.
The ASX200 closed basically unchanged on Thursday leaving the index up over +10%, excluding dividends, with just today remaining of FY23, again equities look set to outperform cash although they have tested our nerves at times. Yesterday’s gains were again focused on the Tech Sector which has rewarded investors admirably over the last 6 months.
