When inflation rises it takes interest rates along for the ride which flows down to multiple contraction / a drop in valuations i.e. people are prepared to pay less for a company’s potential growth / yield because they can suddenly get an improving return on their risk free funds at the bank i.e. a major tailwind for stocks has become a headwind
The US literally pumped money / stimulus into their economy after the GFC but the amount pales into insignificance compared to their extreme efforts post-COVID, never in history has the global economy experienced such phenomenal economic stimulus effectively providing “free money” which has fuelled massive M&A and buyback activity in equities
MM believes that company buybacks are close to a point of inflection which should remove an enormous tailwind for stock indices i.e. one of the largest net buyers of stocks may retreat
MM remains mildly bullish Australian equities looking for 4-6% further upside i.e. not a big call but we do anticipate reducing our risk if such a move unfolds
MM is looking for around 10% upside in copper in the coming months but we must remain mindful of how quickly some moves unfolded in 2020/21, in both directions!
The ASX 200 finished lower, recovering from a decline of around 0.7% earlier in the session as a blockbuster day of reporting continued to drive a highly mixed market. Breadth was weak for much of the day, with the index improving through the afternoon as some of the pressure on the major banks eased.
The ASX 200 struggled on Wednesday as reporting season weighed on sentiment and the index; it's only early days, but we’re seeing a very different story emerge locally compared to the recent season in the US. The S&P 500's 2Q26 earnings season is essentially complete and has been strong, while the ASX 200's August reporting season has only just begun, but with less than 10% of companies having faced the music, the early signs are not overly encouraging.
The ASX spent Wednesday firmly on the back foot, opening around 0.4% lower before selling accelerated through the morning as investors digested another heavy batch of results alongside yesterday’s hawkish RBA rhetoric. At the lows, around 70% of the index was trading in the red and all but one sector lower, before a steady move through the afternoon helped to claw back some ground.
The ASX 200 advanced +0.2% on Tuesday, supported by the RBA leaving rates unchanged, as was expected. The accompanying rhetoric from Michelle Bullock also contained no hidden surprises, with the bond & FX markets hardly moving bar a brief relief spike when no hike was announced. The RBA remains understandably cautious as they weigh a soft property market versus sticky inflation. However, credit markets are slowly but surely painting a more supportive picture for stocks.
The ASX 200 finished higher today, with the market spending much of the session in positive territory as investors worked through a busy day of reporting season before the RBA took centre stage in the afternoon. The index briefly pushed toward 9,275 following the decision to leave rates unchanged at 4.35%, before giving back some of the move into the close as Governor Michele Bullock made it clear the Board remains a long way from declaring victory over inflation.
The ASX 200 erased some of its late-morning losses on Monday to finish the session down just 0.3%, not a great performance after US indices powered higher on Friday night, with the banks again the local bourse's Achilles' heel. Such was the influence of the banking sector that even though over 55% of the main board closed higher, the index still fell by more than 30 points as a strong resources sector couldn’t offset steep losses by Westpac (WBC) and others.
The ASX eased from near-record highs today as investors turned more selective ahead of a busy week for domestic earnings and monetary policy. Financials were the clear drag after Westpac reported, while strength across materials and gold helped offset some of the weakness.
The US labour market appears to have “rolled over”, with July non-farm payrolls unexpectedly falling by 23,000 and the previous two months revised down by a combined 103,000 jobs. Wage growth also eased to 3.15%, its slowest pace in almost three years, reinforcing the view that inflationary pressures are gradually subsiding. Credit markets responded by scaling back expectations for a September Fed rate hike, with this week's US CPI report now looming as the next key event required to reinforce the less hawkish outlook.
The ASX 200 finished a strong week up +3.2%, posting new highs on three of the five sessions. August is only one full week old, and the local market has already surged towards 9300 with no end in sight as the miners continue to drive the index higher. Monday is set to deliver a repeat performance as a soft US jobs report dulled the prospects of Fed rate hikes, pushing the miners and, in particular, gold names substantially higher after the precious metal surged over US$100.
The ASX 200 finished essentially flat, though it did recover from early weakness, having pulled back and tested this week’s breakout level (~9200), before pushing higher – a positive technical sign. After resetting record highs twice this week, the market moved into more of a holding pattern ahead of next week’s heavier reporting calendar, with strength across materials and technology offset by weakness in the banks and selected healthcare names.
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