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A lacklustre start to a week dominated by central bank calls on interest rates, headlined by the US Fed on Thursday night as weakness in China continues; data over the weekend showing China’s new home prices fell at their fastest pace in more than nine years in August, putting pressure back on the mining stocks today.
Official data released on Saturday showed that China’s new home prices fell at their fastest pace in more than nine years in August, with economic stimulus failing to deliver a meaningful recovery in the country’s property sector. New home prices fell 5.3% YoY, the fastest pace since May 2015, compared with a 4.9% slide in July. In monthly terms, new home prices fell for the 14th straight month, down 0.7%, matching a dip in July. Much to Beijing’s chagrin, China’s property market continues to struggle with heavily indebted developers, unfinished apartments, and declining buyer confidence, weighing on the overall financial system and endangering the year’s 5% economic growth target.
The ASX200 advanced +1.5% last week (inclusive of dividends) as the Materials Sector bounced back with a bang, while the high-flying financials were the only meaningful drag on the index. The out-of-favour commodities took it in turns to squeeze the shorts last week, with the lithium stocks soaring on Wednesday, passing the baton to uranium on Thursday, followed by coal and gold on Friday, ultimately delivering an impressive +6.2% gain for the Materials Sector over the week
A solid end to a good week for Australian shares, the ASX200 up 1.5% inclusive of dividends, with the Material sector driving the gains – the first time for a while – with the financials the only sector to lose ground.
Many investors expected the US Presidential debate to be the focus this week, but Vladamir Putin stole the thunder from Harris and Trump. The Russian President is considering restrictions on uranium, titanium, and nickel exports – he is playing a tough “game of chicken” because Russia needs the money but is keen to limit sanctions by the West due to the war with Ukraine.
A solid session today with broad-based buying and importantly, both index heavyweights (Banks & Miners) made strong headway. The bid is coming back into the resources and if banks can just hold it together, the index should finally breakout to be highs, now less than 100pts away.
We are making several changes to this International Equities Portfolio.
Overseas stocks experienced a mixed night, and European indices delivered varied performances. The EURO STOXX 50 advanced 0.3%, while the FTSE fell -0.15%. The US market delivered an impressive turnaround after initially plunging on a higher-than-expected inflation print – US August CPI +0.3% MoM versus 0.2% expected. Stocks initially tumbled after the CPI but investors chased shares of mega-cap tech and semiconductor names in afternoon trading with heavyweight Nvidia (NVDA US) closing up +8.2%.
A weak session for the US banks, not something we’ve seen on the local bourse this year, dragged the Dow lower overnight but not in any meaningful manner. The American banking sector has been consolidating its strong advance from its 2023 low around current levels for the last six months, albeit in a volatile manner. Following the comments from JPM, a re-test of the August lows wouldn’t surprise; around 8% lower. This is not a great read-through for the ASX banks, which are trading at multi-year highs.
