The ASX200 fell over 1% yesterday as increasing Covid cases across the globe started to weigh on an already fragile market – it already feels like ages ago that everybody was trying to buy into the re-opening trade! Over 80% of stocks on the main board fell on Monday but although there was broad based weakness it was on relatively low volume suggesting buyers simply took a step backwards as opposed to the sellers returning in force. Rising economic fears weighed on the miners as would be expected with a number of prominent names very close to making fresh 2022 lows e.g. OZ Minerals (OZL), BHP Group (BHP) and South32 (S32).
Yesterday we highlighted the risks posed to equities from the looming reporting season but it was Covid returning to the fray on Monday which sucker punched stocks as Macau shut down its casino’s for the 1st time in 2-years and QLD announced a major outbreak on a cruise ship, unfortunately it all sounds pretty familiar. MM still favours local stocks grinding higher through July but it’s certainly not going to be an easy journey – at least the statistics are on our side:
- Since the 1990’s July has been the 2nd best month for Australian equities with an average gain above 2% although it usually tops out in the 3rd week.
- A 2% gain for July only targets ~6700 where we opened yesterday illustrating how our 6850 target is on the optimistic side, almost 4% above yesterdays close.
Importantly it wasn’t just local the stocks that fell away yesterday, when our market closed at 4pm the S&P500 was down ~1% while both crude oil and copper were more than 2% in the red. Not surprisingly following the news from Macau the Hong Kong index received some heavy handed attention finally closing down -2.8% as risk assets remain far more prone to embrace bad news as opposed to good.
Overnight we saw US tech stocks garner the sellers attention as the fickle nature of the market took another twist within 24-hours I.e. sellers passed the baton from value to growth stocks. With the exception of Twitter Inc being smacked after Elon Musk walked away from his $44bn bid for the business the weakness across the tech names appeared to be in fear of this weeks CPI data (inflation) and the start of the pending Q2 earnings reports.
MM remains mildly bullish the ASX200 short-term
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