The ASX200 continues to dance around the 7400 area, it’s now been well over 6-months of passing the performance baton between different stocks & sectors with the only constant being whenever the market looked ready to enter a trend it would reverse. Monday saw relatively broad based gains but an average day for a number of the major miners saw the markets final gain limited to 0.3% on a day which saw China appearing forced to cut rates as Omicron threatens their economic growth. The move by the PBOC was definitely from left field:
- China unexpectedly cut two key Interest rates by 0.1% – the 1st time in almost 2-years.
The issue for some market sectors was very much around the interpretation as to why the Chinese government felt they needed to act:
- GDP for the last quarter of 2021 came in at 4% and Retail Sales for December fell to 1.7% neither were that far out of line with analyst expectations.
However, the look & feel from the move on rates suggests the PBOC feels the Omicron strain is set to exert a major headwind on economic growth through 2022 – iron ore fell 2%, not dramatic but after the recent strong rally its easy to comprehend why some profit taking rolled through the sector. Disconcertingly China is trying to adopt a zero tolerance COVID policy and they’re cutting interest rates while most of the developed world are both reopening borders and starting to hike rates. I cannot see China being successful on their COVID plan which is bad news for supply chains but the property crisis across the world’s 2nd largest economy does feel unlikely to be capable of withstanding a rising interest rate environment i.e. it needs help leaving Xi Jinping with lots to weigh up.
Overnight saw US markets closed for Martin Luther King Day but Europe took over the mantle with strong performances being delivered by most bourses across the region. The SPI futures are calling the ASX200 to bounce another 0.3% early on this morning as stocks continue to search for direction.
MM remains bullish the ASX targeting fresh highs in 2022
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