Archives: Reports
It’s not often we see the ASX up ~1% yet the banks finish lower on the session, but that was the case today and it speaks to how aggressive the move back into resources has become in the last few sessions following the PBOC’s intervention, and it seems there is more to come if Chinese state owned media is correct.
What Matters Today: Three stocks we like when Australia follows the US & mortgage rates finally fall
The ASX200 slipped -0.2% on Wednesday while extending its recent stock/sector reversion. Commonwealth Bank (CBA) declined by -2.3% while BHP Group (BHP) added another +3.8%, one more similar day, and BHP will reclaim the top spot as ASX200’s largest company. The rotation back in miners following China’s mammoth stimulus saw iron ore rally back towards $US100/MT; remember, analysts are valuing the likes of BHP and RIO, with the bulk commodity closer to $US80/MT.
Weakness again at the index level largely due to bank selling, while the miners were top of the tree for a 2nd day running. Inflation is now back into the RBA’s 2-3% target, and while this was a monthly read only today, the trend is heading in the right direction having peaked at 8.4% in 2022. Inflation down, growth slowing, employment conditions softening, wage growth moderating, all point to lower interest rates, it’s just a matter of when.
On Tuesday, the ASX200 delivered a perfect example of how investing is far more about stock/sector performance than the underlying index, which attracts too much attention. So far, 2024 has been dominated by interest rate-sensitive stocks, with the Tech, Financials and Real Estate sectors all up over +20%. Conversely, the materials and energy names were down over 15% before yesterday’s dramatic reversion – one day doesn’t make a summer, but it did catch our attention
A mildly weaker day at the index level, though lots going on under the hood with a big rotation playing out causing a 6% price differential in the performance of CBA down -3% v BHP up +3% following a string of stimulus measures from Beijing.
The BofA’s September Fund Manager Survey (FMS) revealed a “big shift” from global cyclicals to bond sensitives. September saw a rotation into defensive sectors and out of cyclical sectors. Fund managers’ relative net overweight stance towards defensives (utilities and staples) versus cyclicals (energy, materials and industrials) is now the highest since May 2020. If/when China does regain investors’ confidence, the unwind is likely to be dramatic.
The ASX opened the week on the back foot giving back around 30% of last week’s gains, weighed by the retailers, supermarkets in particular as the ACCC sets their sights on misleading conduct.
Freight costs are already in a recession, and truckers who bought their rigs back in 2022, when shipping rates were high, are struggling to get enough work to pay for them today after prices plunged. Over the last 20 years, it is not a good sign for manufacturing jobs to have trucking rates falling. We may have solid GDP in the U.S., but every other time, the Cass Linehaul Index rate of change has gone negative; it has brought falling GDP at some point as part of the cycle. Hence, it would be unusual for the U.S. to escape a technical, economic recession this time, with trucking already in one.
Last week, the ASX200 advanced another +1.35%, taking the index to all-time highs. Gains were broad-based, with 8 of the main 11 sectors advancing by over 1.4%, while only the healthcare stocks weighed noticeably on the index. There was also some reversion evident with lithium and uranium plays surrendering some of last week’s gains while the banks returned to the winners enclosure:
The ASX saw the best of it early, before tapering off into the close as China failed to cut rates. Still, a new all-time high today for stocks, the ASX 200 above 8200 while Gold also notched up a milestone trading at $US2600/oz. A good week for equities, the market up 1.4% with strong performances by some interest rate sensitive stocks.
