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We are making several changes across portfolios today
The ASX200 finished up just +0.1% in a choppy session on Wednesday, with the banks offsetting further weakness by the miners – a 6.67% plunge by Chinese stocks didn’t help. A 1.8% surge in New Zealand’s equities after the RBNZ cut rates by 0.5% helped local sentiment. Still, it wasn’t enough to make meaningful gains as the heavyweight iron ore miners dragged the chain due to China’s lack of further stimulus measures on Tuesday. However, we wouldn’t fight Beijing, who announced yesterday evening AEST that further announcements will follow on Saturday when markets are closed—we “wouldn’t be short for quids.
The ASX felt tired today, having pushed up ~50 points early on, the optimism was lost when China came online at 12.30pm and fell ~4% dragging down resources stocks that dominated the detractors, with BHP now ~6% from its highs last week as investors fret over a lack of detail on China’s stimulus plans.
The ASX200 retreated -0.35% on Tuesday after a briefing from China’s National Development and Reform Commission provided few details on further stimulus. We thought there was a distinct risk of “buy on rumour and sell on fact” playing out, but instead, with few facts actually being released, it was simply a case of sell.
A choppy session for local stocks, keying off Asian-inspired volatility as China came back online post their Golden Week holiday. China shares were +10% on open before losing more than 50% of the gains while Hong Kong shares fell ~6% by our close, having been open for the past week.
Recent stimulus announced by Beijing and the PBOC included interest-rate cuts, billions of dollars of liquidity support for stocks, and a vow to end the long-term depreciation in property prices – as we’ve said before a “whatever it takes approach”. Chinese stocks are due to reopen this morning after enjoying the Golden Week break, with many analysts now expecting further gains into Christmas.
Last week, the AX200 slipped -0.76% following weakness across the influential financial and materials sectors, and only the energy stocks encouraged the bulls. While China enjoyed its Golden Week holiday, investors’ attention reverted to the mounting tensions in the Middle East ahead of last night’s US employment data, which ultimately alleviated market fears about the health of the US economy. The winners & losers were an eclectic bunch this week as most sectors, outside of oil, went into a holding pattern
Another fascinating week comes to a close ahead of a much-needed long weekend. Energy stocks have been the big winners this week, with oil stocks adding to gains today after Joe Biden said Israel and the US were “discussing” a strike on Iranian oil facilities.
The ASX200 experienced another quiet session as China Golden Week approached its conclusion. The index finished up +0.1%, even with over 50% of the market closing lower. However, when CBA, BHP, and CSL all advanced, the markets were going to be well supported. Chinese stocks traded in Hong Kong took a rest after surging ~30%, but a 1.6% pullback was nothing to worry the bulls.
Another quiet session for local stocks as they consolidate around ~8200 after a good run in September, and ahead of important US employment data due out on Friday. While expectations for aggressive US rate cuts helped investors look past recent weakness in the labour market, we now have 7-8 cuts already priced into the curve, meaning we expect markets to be more sensitive to any disappointing economic data, and Friday will be a test of that.
