Indices: Australian ASX 200
US stocks had another mixed session overnight with the interest rate-sensitive Real Estate and Tech two of the best performers, the Dow finished down -58 points while the tech-based NASDAQ rallied +0.5% i.e. no follow-through selling after Jerome Powel’s hawkish comments yesterday. The SPI Futures are pointing to a +0.4% gain early this morning helped by a 35c bounce by BHP.
The ASX200 rallied +0.6% on Monday following a positive lead from Wall Street, the gains were broad-based with over 70% of the main board advancing which was made even more impressive by several stocks trading ex-dividend e.g. Bendigo Bank (BEN), Ramsay Healthcare (RHC) QBE Insurance (QBE) and Iluka (ILU). Ironically the day before the RBA’s set to hike rates for a 10th consecutive time the best-performing sectors were the interest-sensitive names, i.e. Consumer Discretionary +1.95%, Tech +1.8%, and Real Estate +1.7%.
The ASX200 edged marginally lower last week as broad-based selling was offset by strength in the resources i.e. it’s not often that the ASX can shrug off a bad week for the banks – we can see this relative performance reversing throughout the coming week, especially after Chinas modest 5% growth target
We’ve been expecting a year where uncertain economic times would deliver volatility on the stock/sector level and the first two months have certainly delivered i.e. year to date over 30% of the ASX200 has rallied or fallen by over 10% with the winners trumping the losers by more than 2:1, a pretty good result considering reporting season held a slight bias towards the bears.
US stocks closed mixed overnight with the Dow edging higher while the S&P500 fell -0.5% as US bond yields ground ever higher, the 10’s tested 4% dragging the growth stocks lower although the $US surprisingly slipped -0.4%. The weakness in the Greenback helped the commodities which look set to support the Resources Sector with BHP rallying +50c in the US helping the SPI Futures to close largely unchanged this morning.
Tuesday again saw ASX investors focus on reporting season with retail stocks coming under significant pressure, as we mentioned earlier the local consumer is about to have significantly less discretionary spending e.g. Super Retail Group (SUL) -2.2%, JH Hi-Fi (JBH) -2.7% and Harvey Norman (HVN) -7.5%. One characteristic we did notice yesterday was some bargain hunting surfacing into stocks which started on the back foot e.g. HVN reclaimed 45% of its initial losses while Sandfire Resources (SFR) reversed an early -6.7% dip to close up on the day. One day doesn’t make a summer but this is usually what starts to unfold when markets “are looking” for a low.
