Archives: Reports
A muted finish to the week with winners and losers split fairly evenly on the ASX200. Materials were on the winning side, supported by strength in iron ore and gold, offset by further weakness in Energy which continued to slide on higher crude inventory levels in the US. The main index finished the week up +72pts / +1.05%, a strong result particularly given the sizable ex-dividends from NAB & ANZ.
Through 2023, the six stocks in the food sector have been split into clear winners and losers, with no middle ground. What caught our eye yesterday was that the four members that rallied came from the loser’s enclosure and vice versa, i.e. some sector reversion was at play. The Food and beverage Sector has endured an awful four years, correcting ~40% as it had to contend with events such as severe weather patterns to Chinese tariffs, surging inflation plus, of course, COVID. As a sector, it looks very oversold, and a decent bounce wouldn’t surprise, but this area must be evaluated on a stock-by-stock basis.
Traders faded yesterday’s surge in equities, giving back just shy of half of the gains seen in Wednesday’s session. Energy was under pressure on reports of higher crude inventory levels in the US while strong local Employment data took the shine off Tech and Real Estate.
We are amending two MM Portfolios today
We have written almost at nausea around bond yields through 2023, but while a potential reversal lower is gaining some airtime, the US 2s are still trading ~5%, as they have since July. If we prove correct and yields eventually dip back to where they spent most of Q2, the sector reversion that began a fortnight ago will be in its infancy. The MM Active Growth Portfolio is positioned for lower bond yields; hence, it outperformed by ~0.6% yesterday after enduring a tough couple of weeks when long-dated bonds made fresh 2023 highs through October. It’s going to be a fascinating run into Christmas!
A ‘risk on’ session washed over the ASX today with stocks enjoying a softer inflation read from the US overnight and a subsequent drop in bond yields – markets are pricing out further interest rate hikes, and starting to price in a higher potential for cuts. The market opened well this morning, peaked at midday and while we finished ~20pts off the session highs, all sectors finished higher with over 80% of stocks on the main board in the green.
US inflation emphatically resumed its descent in October, pulling inflation closer to the 2-year low reached in June/July. Wall Street rallied strongly last night on inflation-fuelled optimism that the Fed’s “endgame” is nigh, over 95% of the S&P500 advanced, with real estate and regional banks enjoying standout gains while the small-cap Russell 2000 Index outperformed, adding ~5.3%, well over twice the gain of the S&P500, i.e. in equities it was a big night of “risk on” and rebalancing portfolios as US 2 years plunged ~0.2% to below 4.85% and the $US fell -1.4%, the most since January.
Equities regained their mojo today after two softer sessions either side of the weekend, the ASX200 popping back above the 7000 an a broad-based rally with more than 80% of the index finishing higher though strong contributions from the resources sectors was key. Energy in particular was strong following OPEC releasing forecasts for oil demand to increase by 2.5mbboe a day helping to stem the weakness in a sector that has been under pressure.
ELD surged +18.28% on Monday after the agricultural services business delivered a small beat for FY23 – sales fell 4% to $3.3b, slightly ahead of consensus. However, cash conversion caught the eye with operating cash flow ~50% above consensus, helping the company to pay a 23cps div (30% franked), 7cps above expectations, i.e. the stocks now forecast to yield ~7% over the coming 12 months. The company has encouragingly managed costs far better than expected, and it appeared on Monday that many traders decided all at once that the reason for being extremely negative towards the stock had disappeared in one set of numbers.
A poor session to kick off the new trading week with the ASX snubbing the strength in the US on Friday night while latching onto any negative rhetoric locally that progressively weighed on the index throughout the day – finishing smack on session lows, not a great look!
