The ASX200 kicked off the last week of October in solid form rallying to new monthly highs in the morning before finally managing to close up 0.3% even as more stocks actually closed in negative territory. The resources names, led by the energy component, were the best on ground while the tech sector slipped lower but overall it was another quiet session as investors appear reticent to buy into strength, they must have read our notes!
As all children in NSW went back to school the “reopening trade” continued to drift lower as it continues to illustrate that markets look at least 6-months ahead e.g. Flight Centre (FLT) -2.2%, Corporate Travel (CTD) -2.3% and Qantas (QAN) -2.6%. Getting ahead of the sentiment / price curve can prove profitable when well timed and of course vice-versa, if I was to go out on limb today I would pick the gold stocks as being poised for some strong performance catch up which is not a big ask considering their horror showing in 2021 – the headlines in July 2020 were classic topping commentary, we saw in the AFR “Fear & cheap money sends gold price soaring” and “investors think the fundamentals are in place for gold to challenge $US2,000” but as is so often the case when journalist get excited the rest is history.
Bond yields took a break on the upside on Monday which was no surprise after the RBA’s intervention into the local market on Friday but at this stage the 1 trillion dollar statement has done little more than slow the rally in Australian bond yields. Last weeks defence of the 0.1% level by the RBA still feels like it’s largely fallen on deaf ears with December 2022 bank bills still nudging 0.8%, in other words money markets are factoring in an increasing probability of rate hikes next year although most analysts still say 2023.
Overnight US stocks rallied with the Dow and S&P500 posting fresh all-time highs, the tech heavy NASDAQ is still a little shy of its milestone but a 13% surge by Tesla (TSLA US) following the news that Hertz have just ordered 100,000 vehicles from Elon Musk’s now trillion dollar beast helped the index outperform on the night. The SPI futures are calling the ASX200 to open around 15-points higher, getting ever closer to its new high.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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