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The ASX200 was trading down almost 1% at midday on Monday before buyers returned, trimming over half of the morning’s losses. The song remains the same, with buyers of weakness emerging, and again, banks led the way, e.g. Commonwealth Bank (CBA) +1%, and Westpac (WBC) +0.6%. Considering the geopolitical backdrop, Monday’s 0.4% pullback was a stoic performance, which, in our opinion, illustrates that many investors, across the whole spectrum, have been caught underweight in stocks following the market’s aggressive post “Liberation Day” V-shaped recovery. The ASX200 has fallen for five straight sessions, but it remains less than 2% below this month’s all-time high, and this morning, a large portion of those losses are likely to be regained.
- The markets’ controlled caution is constructive in our opinion, with stocks wanting to rally if things don’t escalate too severely in the Middle East.
Gold and oil stocks failed to catch a bid even after the US entered the Israel-Iran conflict, with some buying of the $US Dollar the most evident haven strength in a day that we wouldn’t describe as overly risk on or off:
- Northern Star (NST) -3.1%, Ramelius (RMS) -3%, Evolution (EVN) -2.6%, Regis Resources (RRL) -1.3%, and Woodside Energy (WDS) unchanged.
As we’ve discussed in the past, MM is only focusing on stocks and the relevant risk-reward as opposed to trying to unravel the many threads in the current crisis. At this stage, we believe stocks represent good buying if “situation risk” weighs on them over the coming weeks. It’s easy to say (type), but when the press is negative, it’s often a good time to accumulate shares, ideally into weakness, and at the moment, the comfortable stance is to make excuses to be uninvested, yet stocks are still knocking on the door of their all-time high.
Overseas markets rallied sharply overnight, as Iran’s retaliatory strikes at a US air base in Qatar were perceived to be symbolic and unable to trigger a broader economic fallout. They spared energy infrastructure, allaying investor concerns that the conflict would severely disrupt supplies from the Middle East. Then, Trump announced on Truth Social that both sides had agreed to a ceasefire, though no statements were forthcoming from Israel or Iran.
Oil tumbled 7%, allowing stocks to rally strongly, with the S&P 500 closing up 1%. In Europe, the market closed lower, having missed much of the US advance, with the EURO STOXX 50 and UK FTSE both slipping 0.2%.
Note: Shawn’s Trading idea missed out on selling WDS by 1c on Monday; he is likely to take the reduced profit this morning, with any update on the MM site.
- The SPI futures are calling the ASX200 to open up 0.7% this morning, back within striking distance of its all-time high.
On Monday we heard another negative story on the banks although UBS’s downgrade of ANZ was very stock specific, as opposed sector directed:
- ANZ ended the day down -0.6% with funds appearing to switch across to CBA +1% and Westpac (WBC) +0.6% – what’s new, if in doubt, buy CBA!
