Archives: Reports
A tough day at the office for the ASX, tracking weakness in US/European markets that permeated across Asia. More tension in the Middle East is threatening higher Oil prices that would underpin persistent inflation and higher interest rates, all very logical and these concerns have pushed the ASX 200 back down to the bottom of its recent trading range.
Over the last eighteen months, as interest rates soared higher, the small caps have stood patiently in the naughty corner as their cost of funding has gone from bad to worse, whereas US Big Tech has rallied, assisted by their large mountains of cash. If we are correct and bond yields are “looking for a top”, then stock/sector reversion is likely in many pockets of the market, today, we have looked at the outperformers with an eye on whether some look rich at current levels.
A choppy but overall positive session at the index level, although there was a lot happening under the hood, with some hits and a few big misses to get across today.
US stocks closed lower overnight, with an NVIDIA-led sell-off in Big Tech” weighing on the indices, the Dow managed to edge higher, whereas the NASDAQ closed down -0.3%. Under the hood, Bank of America (BAC US) reported strong earnings, but Goldman Sachs (GS US) was a messier result following losses from its investment in the Greensky fintech business. Nvidia led chip companies lower as the U.S. Government looks to tighten restrictions on chip exports to China.
The ASX had a positive session, although finished ~40pts below the highs after the latest RBA minutes showed another rate hike is not off the table. The list of today’s winners is an eclectic bunch with one thing in common, most have had a horrible last 12-months, perhaps some bargain hunting might be about to emerge.
Last week, we saw JP Morgan (JPM US), Citigroup (C USD), and Wells Fargo (WFC US) report robust earnings, although stock gains were relatively muted as investors contemplated what comes next after the sectors enjoyed a period of rising interest rates. Analysts were made to look too bearish as they had expected slowing loan growth to reduce net interest margins (NIM), but so far, things are holding up strongly.
A lacklustre session locally with a smorgasbord of uncertainty playing into investor minds, a -0.35% fall was okay considering the news flow. Energy and material stocks were reasonably well supported, although considering what Oil & Gold prices did overseas, no one got carried away, while technology tracked their overseas counterparts lower.
After a few quiet sessions, crude oil soared +5.7% higher on Friday, ending the week with the same concerns as it had opened on Monday. Investors are bracing for the ramifications of the almost inevitable ground assault on Gaza while, at the same time, the White House announced its first sanctions on companies allowing Russia to sell oil above $US60, the level set by the US and its allies – as we mentioned last week the US is “short & caught” crude oil and will be proactive in keeping the price rises in check as they rebuild their reserves.
With over two weeks remaining, October is back in positive territory, although not in a convincing manner, the index is up +0.03%, while six out of the 11 sectors are higher. Not surprisingly, the Healthcare Sector is down -3.06%, but it probably would surprise most subscribers to know that the Energy Sector is faring worse, down -3.07%, even after the positive blip in oil prices following the attacks on Israel by Hamas – an illustration of why we believe the advance by oil and its related names is maturing fast although they should rally on Monday morning e.g. in the US Exxon Mobil (XOM) rallied +3.2%.
A great note….
