The ASX200 disappointingly reversed lower yesterday after a promising early start following a strong night on Wall Street, however 3 major headwinds engulfed our market throughout the day, MM’s view is the plunge by US futures was key to the decline by local stocks but there wasn’t much good news crossing the news wires for investors:
- US S&P500 futures fell steadily during the local trading session with acceleration to the downside between midday and 1pm, a drop which coincided with a 50-point sharp fall by the ASX200.
- APRA tightened lending requirements as we expected however it also threatened to act again if housing debt continues to rise, MM always gets concerned when regulators try and meddle in “free markets” – that news along with a broker downgrade was enough to see Commonwealth Bank (CBA) give back 2% of its recent gains.
- NZ hiked interest rates from 0.25% to 0.5%, no surprise but again not good news especially when we consider the long term strong correlation between interest rates with our close neighbour.
The trifecta of negativity pushed over 67% of the ASX200 into the red with some heavy profit taking rolling through many re-opening names while the rate sensitive tech names remained on the back foot. Two consistent themes have been unfolding through 2021 and at this stage they feel likely to continue:
- Elastic bands only stretch so far as “buy the dip and sell the pop” continues e.g. Wednesday saw Flight Centra (FLT) and Webjet (WEB) both drop over 6% after hitting fresh 18-month highs earlier in the week.
- The under owned Energy Sector is still being chased as many fund managers miss out after being caught in a crowded underweight fossil fuels stance, most stocks in the group are now up by over 20% over the last month while the underlying index has slipped lower.
Overnight US stocks did the opposite reversing early sharp losses with tech stocks catching our eye as they bounced solidly, the SPI futures are pointing to a solid open this morning up around 30-points / 0.5%.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
Add To Hit List
