Archives: Reports
The gold price is inversely correlated to both the bond yields and the $US, both of which have ticked higher so far in 2024; hence, precious metals have lost their lustre, sending gold stocks significantly lower as the sector remains largely friendless. At MM medium-term, we are looking for bond yields to turn lower, taking the $US and gold price with them, but at this stage, we are in no hurry to pre-empt the catalyst which will create such a move; hence MM reduced our Active Growth portfolio’s gold exposure in January.
While the market was down today, it traded a long way up from the session lows as ‘buy the dip’ played out fairly aggressively. SPI Futures ended the day +70pts above their 7am lows supported by company results that were better than expected/feared in most cases, and importantly, the market is prepared to reward the beats.
Overnight US markets sold off aggressively after a hotter-than-expected CPI inflation read left the optimistic Doves near-term rate cut hopes in tatters. Bonds and stocks both slid following the release, which climbed the most in eight months just when investors were expecting confirmation that inflation is under control; the US 2s climbed back to levels not seen since the December central bank “pivot” – another example of crowded positioning coming under pressure. The release added credibility to Jerome Powell’s “wait-and-see attitude”, with the futures now pricing in a Fed Funds rate of ~4.45% by Christmas, around four cuts.
Volatility is picking up as reporting season builds steam, with some outsized moves permeating through some household names today, more misses than beats which reversed the recent trend.
Crude oil has been supported by major geo-political events since COVID, but it’s not delivered an overly exciting performance from the ASX oil & gas names – uranium has been the big winner in the Energy Sector. The supply and demand fundamentals continue to concern some analysts as record U.S. production combined with a weak Chinese economy creates risks of oversupply, potentially offsetting tensions in the Middle East and the Russia/Ukraine war. Brent crude is trading around its average level of the last five years, albeit with some volatile spikes in both directions.
A softer start to the week with the ASX dipping 0.4%, however, it was very stock specific with CSL down ~5% which accounted for 21pts of the ASX 200’s 30pt loss, while Materials & Energy were also on the nose.
We are amending the International Equities Portfolio
Lithium has been dominating the news around the demise of the ESG Sector for months, but nickel has come to the fore of late as the collapse in the commodities price has led to the closure of mines operated by IGO and Twiggy Forrest’s Wyloo. Now heavyweight BHP Group (BHP) is feeling the pinch with estimates that its Nickel West business is losing $50m a month. The government has even been involved as it aims for a carbon-zero economy by 2030, a big ask if Australian businesses are losing millions in the pursuit of their optimistic goal.
The ASX200 ended a choppy week slightly lower, snapping a two-week winning streak even after three consecutive days of gains from Wednesday. The -0.7% dip over the five days was primarily caused by weakness in the Resources Sector, plus some disappointment after the RBA retained its tightening bias on Tuesday.
Not a lot to invigorate markets today as the index chopped in and out of positive territory. The Uranium stocks saw the most activity following Cameco’s (CCJ US) quarterly result overnight, a topic we’ll cover below. Elsewhere, IT was as strong as Energy was weak and on a market that did little, it was not surprising that winners and losers were split evenly.
