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The ASX200 pushed higher last week, ultimately closing up +1.7%, posting fresh 11-week highs into the close on Friday. The last 2-days caught our attention as the local market reversed early weakness as belief in a 2023 Christmas rally gathers momentum – for the statisticians amongst you, if we’ve already seen the low for the month at 7041 and December delivers the average monthly range of 2023, by extrapolation, the index is destined to test the 7400-7450 resistance area.
The market opened on the backfoot, down early, before rallying ~50pts into the close to finish at session highs, clearly a bullish tone to end the week with the solid intra-day move. The lack of selling as December wears on is the theme we’ve been highlighting in recent reports with a few examples taking shape in recent sessions.
What Matters Today: Is it time to consider the Energy Sector as Santos & Woodside consider a merger?
Yesterday, we heard that Woodside (WDS) and Santos (STO) are considering a $80bn oil & gas merger following the global trend as their operating landscape changes with decarbonisation pressures increasing rapidly. Discussions are at an early stage, with no certainty a deal will be forthcoming; they might be testing the market’s response following the overnight announcement. Over recent months, major shareholders have been touting ideas on how STO could unlock shareholder value, including a break-up of the business.
There wasn’t much on offer for the ASX today, a much calmer session after the fireworks of yesterday. Shares traded in a tight ~30pts range with a strong rally through the afternoon seeing it close marginally lower.
We remain bullish equities through December with the ASX200 Accumulation index poised to make fresh all-time highs, i.e. the ASX200, including dividends. Hopes of lower interest rates are driving the recent rally through 2024. However, investors are largely ignoring the risks of an economic contraction as the hiking cycle bites consumers and borrowers – the “Goldilocks scenario” is the market’s current preferred scenario.
Stocks enjoyed the best one-day jump in over a year today as peak rates met solid but not spectacular growth numbers supporting the ‘goldilocks’ economic scenario, which is very bullish equities if it comes off. The ASX recouped all of yesterday’s losses and some as we experienced a bottom left, top right sort of day, sessions like this are what equity investing is all about!
The ASX200 reversed lower for the week on Tuesday as the Resources Sector led the declines, e.g. Pilbara (PLS) -8.5%, IGO Ltd (IGO) -6.7%, Northern Star (NST) -4%, and Sandfire Resources (SFR) -3%. However, with well over 80% of the main board closing lower, there were few bright pockets, with the exception of the Healthcare Sector, which enjoyed a defensive bid, ultimately closing up 0.03%, not conclusive but at least positive.
Futures were pricing a decline of ~40pts this morning however the market fell double that ahead of the RBA decision on interest rates – which were kept on hold as expected – before stocks had a slight whimper into the close.
Always expect the unexpected is a very useful adage for investors, and today, we have looked at 3 cases that would put a spanner in the works for the majority of investors as they sit in the contrarian corner with 2024 looming on the horizon – it’s now only 20-days until Christmas. It’s worth remember this time last year; everybody was bullish on the EV trade while gold was hardly getting a mention. Here we are with a few weeks left of 2023, and lithium has crashed ~80% while gold posted fresh all-time highs.
A very solid start to the new week, particularly for resources, IT and property stocks as they key off more market-friendly rhetoric from the US Federal Reserve before the RBA’s Michelle Bullock steps up to the plate tomorrow, with the consensus call of no change one that Market Matters agrees with.
