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The game of chicken is back on between the US and China, just in time to deliver some seasonal October volatility. Chinese President Xi Jinping has drawn a clear red line in a bid to stem new US export controls, threatening to reignite a tit-for-tat trade spiral with Donald Trump just weeks before a planned meeting between the leaders of the world’s biggest economies.
The ASX200 ended the week mildly softer, with tech and consumer discretionary stocks dragging the index down 0.3%. While the index treads water on the stock & sector level, the local market is getting more interesting with a strong performance by the miners almost offsetting broad-based weakness, with 5 of the main 11 sectors retreating between 1.4% and 2.4%.
By Friday’s close, the winners’ enclosures contained an eclectic mix, with the material sector dominant in the positive contributors while the tech names were noticeable on the other side of the ledger:
The ASX closed lower for the week, with today’s session capped by a risk-off tone as peace headlines out of Gaza knocked the shine off oil and gold, while iron ore heavyweights fell on renewed pricing tensions with China.
The ASX 200 rose +0.3% on Thursday, though the real action played out beneath the market’s surface, with the materials sector leading the charge, up +1.8% despite a rare pullback in gold stocks.
The ASX snapped a three-day losing streak today as heavyweight miners powered the market higher, pushing the index back within reach of record levels. A 14-month high in copper prices sparked strong gains across the materials sector, offsetting weakness in banks and tech.
The ASX200 slipped 0.1% on a quiet Wednesday, which saw some initial morning weakness before buyers returned, taking the index back towards unchanged. Outside of Wesfarmers (WES) -7.5 points and James Hardie (JHX) +5.7 points, none of the main board added or retracted more than 2 points from the index.
The ASX eased modestly during the session as losses across retail and technology stocks outweighed strength in healthcare. Investors also took profits from gold miners after the precious metal briefly broke through the US$4000/oz barrier for the first time.
The ASX200 peeled away 0.3% on Tuesday, the first “real” day of trading this week, although losses weren’t overly broad-based, with 40% of the main board closing higher. While the retailers led the decline, it was noticeable to see some profit-taking wash through many pockets of the market as the US government lockdown drags on, even some gold names closed lower, despite the precious metal posting fresh highs.
A softer session for local equities, with volumes still light on the ground despite positive offshore leads, with gold’s relentless rise still clearly in focus with several brokers upgrading their forecasts. We think some consolidation is overdue for local stocks – a healthy reset as we move through October remains our expectation for now.
As we head into October, volatility has started to brew beneath the surface. In the US, volatility on the stock level is testing multi-year highs, and locally, it wasn’t that long ago that we saw the most volatile reporting season in recent memory. And in the last 24-hours, with the infamous October less than one week old, we’ve started to see big moves across stock and commodity markets.
