Archives: Reports
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.
The Australian Healthcare Sector has surged ~30% since late October, and although we are bullish over the coming years, a period of consolidation is overdue, and an 8-10% pullback wouldn’t surprise – at current levels, we aren’t looking to increase our exposure to the sector, pretty much in line with our view on the market in general. The sector has shown a strong inverse correlation to bond yields over the years, falling sharply when bonds rally/yields fall and vice versa. MM’s macro outlook is yields will fall through 2024/5 but not as fast as many hope, and the futures are pricing, another reason why we can see a pullback following the recent strong advance.
Another small gain for the market today took the ASX200 to around 1% below the all-time highs set last week. The banks did the heavy lifting, the Big 4 accounting for around half of the gain by the index, joined by strength in Tech, Utilities and Real Estate.
