The ASX200 has held the psychological 7000 area for the last couple of weeks, but it struggled to maintain a meaningful recovery on the upside as the overall market doesn’t appear to be attracting fresh funds, i.e. investors are happy to switch, but the allure of cash yielding ~4.5% is keeping some money on the sidelines. Yesterday, the AFR said that 42 economists they surveyed believe the RBA will cut rates in August 2024 compared to the previous expectations for a May cut, suggesting investors will need to be very patient to get a policy-induced tailwind. Although bond yields on the futures market often lead by over six months at this stage, they’re not offering any signs of relief, if anything, the opposite.
A poor session on Wall Street overnight is set to see deep losses across the resources sector, while the tech stocks, if they follow the US, will offer a small glimmer of sunshine.
- The SPI Futures are pointing to a drop of over -1.3% this morning, below 7000, following a mixed session on Wall Street, which saw losses across the interest rate & recession-sensitive sectors. Worth noting that volumes were low overnight given the public holiday, suggesting the moves on the Futures market were exaggerated.
MM remains neutral towards the ASX200 in the 7000-7500 range
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US stocks experienced a mixed and volatile session to start the week as global bond yields surged ever higher; traders digested ongoing comments from Jerome Powell that interest rates will need to stay higher for longer to combat inflation, e.g. the US 10-years hit their highest level since 2007. Interestingly, the tech sector, which has withstood rising yields all year, managed to close higher even as bonds fell/yields rose.
- We remain bullish on the influential US tech stocks, with another test of the psychological 16,000 area still our preferred scenario.
MM remains cautiously bullish towards US tech
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The HK China Index rallied +2.6% on Monday as the psychological 6000 support area holds firm, similar to the ASX200’s 7000 area. Our preferred scenario is the China-facing index will retest the 8000 area over the coming months, but again, we are conscious that the ingrained trend over the last few years is down and, as such, must be respected.
- The HK China Index is gaining strength around current levels, but we are attributing a ~20% possibility that it will again break down and test the 5000 area.
MM remains mildly bullish towards the HK China Index into 2024
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