The ASX200 rallied 0.3% on Thursday although unfortunately it lost around 70% of its early morning gains as profit taking appeared to roll through the broad market with over half of the market finally closing down on the day. The local index has already rallied 2.3% this week and 4.5% this month hence its not surprising a few nervous investors / traders took some money from the table, remember it was only 2-weeks ago the market was in the middle of an 11% plunge that had most commentators discussing bear markets. Our best guess is the index now consolidates recent gyrations in the 7200-7400 region but overall our preference is we see new all-time highs this financial year, although MM believes its likely to be a very stock / sector specific rally.
The banks again helped the market yesterday following a 10% beat of expectations by National Australia Bank (NAB) which saw the stock rally 4.5% while CBA added another 1.2% to Wednesdays stellar 5.6% gain. We often say the market doesn’t go down without the banks and its certainly been the case this week plus as we’ve pointed out previously this is a very strong period seasonally for the sector as investors position themselves for CBA’s dividend next week and ANZ, NAB & WBC all in May – not many Australians are keen to walk away from such attractive fully franked dividends meaning we get a dearth of sellers.
I thought it was very interesting to see CIMIC Group ICIM), Australia’s largest construction company, announce to the market they were looking to increase margins through targeting renewable energy / technology projects, it reminded me of companies flocking to both the BNPL & Bitcoin spaces in recent years, just because you have an intention provides zero guarantees of successful execution, especially as your arriving late to the party. MM believes pockets of this space have become overcrowded and while we have no doubt it’s the future we don’t believe it’s a road paved only with gold – there will be plenty of failures along the way, just as there are with all new ideas / technologies.
Overnight saw US stocks fall away after the US inflation print came in at the highest level in 40-years, surprising even the hawkish market in the process. Comments later in the day from Fed St Louis President James Bullard that he supported raising rates by a full percentage point by July was enough to send the skids back under the growth / yield sensitive stocks and it feels like its time to find out if we have indeed witnessed a dead cat bounce, by the close the S&P500 was down 1.8% and the SPI futures are pointing to an early drop of 0.8% by the ASX200.
MM is net bullish the ASX following its close over 7200
Add To Hit List
