The ASX200 endured a tough start to this week finally closing down 62-points although it was a fair bit worse mid-morning with the index nudging the psychological negative 100-points level at its worst. Losses were relatively broad based with 76% of stocks closing in the red but it was still encouraging to see the market grind higher after its initial savage sell off. A few points caught my attention which dovetails nicely with how MM sees equities through July and August:
- The reflation trade remains “on the nose” as bond yields, the $A, banks and resources all significantly underperformed their peers.
- The Healthcare Sector was the only area where investors sort solace as the Delta Variant proves a formidable adversary.
Volatility increased from the get-go on Monday as the market walked into a plethora of bad news that broke the recent stubborn resistance by equities, at least for now.
- As we all know lockdowns tightened in Sydney and Melbourne with even the most optimistic now doubting we can retake control in the next fortnight.
- The Energy sector fell as crude dipped below $US70/barrel on the combination of economic concerns and a new OPEC production agreement.
- The ASX200 is heavily weighted towards the Financials and Resources with these 2 sectors making up over 48% of the index hence when the “reflation trade” is losing its faithful supporters the impact is significant.
- Altium (ALU) plunged over 10% in early trade following rumours that American software company Autodesk had withdrawn its bid, time will tell but not good for sentiment.
The cocktail of news was enough to send the market back towards its recent low but its going to need a clear break below 7200 to suggest any real movement is finally afoot – this strong support area will be tested this morning after stocks accelerated to the down side overnight with the value stocks again spearheading the declines, the Energy and Financial Sectors were again worst on ground.
US stocks were slammed overnight as investors ran for safety as the Delta Variant starts to seriously threaten optimistic future economic predictions, it was the worst session in 2-months for banks and resources and bond yields fell to their lowest level in 5-months. Commodities which usually key off economic activity were hammered with crude oil down over -7% and copper almost -3% catching my attention. The SPI Futures are calling the ASX200 to drop around 75-points this morning with BHP Group (BHP) falling $1.25 likely to big a major drag on the index.
MM remains a keen buyer of stocks into decent pullbacks
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