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Dovish commentary out of the Fed overnight helped to support equity markets globally over the last ~12 hours, and the ASX was no exception. Interest rate-leveraged sectors of Tech and Real Estate were the most significant beneficiaries as the rally in bond yields cooled off. The US 2-year yields fell back below 5% and Australian bond yields were also lower throughout our session.
Yesterday, BHP announced they were on track to invest another $7.7bn into the second stage of its mammoth potash project based in Canada. The investment is set to double production, making its Jansen potash project one of the world’s largest mines – BHP has to adopt a “get big or get out” approach to the investments; otherwise, it simply won’t move the dial on its earnings profile, the primary reason it hasn’t ventured into lithium. The war between Russia and Ukraine has seen prices double, creating inflation across the food industry, with potash being a core fertiliser for crops such as corn and wheat.
Some reprieve from recent weakness across the ASX today with stocks holding onto morning gains to finish at session highs, up 0.85%, after a weak October saw the market down 3.8%, underperforming global peers.
MM is buying HCA US in the International Equities Portfolio
US indices rallied overnight, reducing losses for October but still registering its first 3-month losing streak since 2020, the S&P500 closed up over 0.6% near the session’s high – bond yields surging to levels not witnessed for 16-years have weighed on stocks through September/October. Real estate and financials outperformed on the sector level while it was a mixed bag under the hood of the influential tech sector, with NVIDIA (NVDA US) and Meta Platforms (META US) closing lower.
The local index saw the best of the day early on, starting off with a respectable ~0.60% rally thanks mostly to a bounce across the Big 4 banks. The strength slipped throughout the afternoon though with cracks in China’s economy leading Materials lower. The index traded down on the session late in the day but managed to close marginally higher.
The NYSE FANG+ Index has corrected over 15% since July, but it wouldn’t take much of a Christmas rally to test its all-time high, especially if Apple Inc (AAPL US) delivers a strong result on Thursday. The performance of the US big tech names has been extremely varied through 2023, from NVIDIA (NVDA US) +180% to Tesla (TSLA US) +60%, but the overriding common denominator is they’ve all enjoyed a strong year-to-date, even as bond yields have surged ever higher.
For the past week, it felt like “when” not “if” the ASX200 would set a new 12-month low. That question was answered today as the local index fell further into despair, weighed on by the Energy, Financials and Consumer sectors. Tech was the only area of the market to buck the weakness, a solid result considering bond yields were broadly higher throughout Monday.
The worst October in five years has seen active money managers cut their equity exposure to its lowest level in more than 12-months as the trifecta of bad news continues to weigh on stocks. The US S&P500 has already fallen by more than 1% on five occasions in October, and we still have two sessions remaining. With Apple reporting on the 2nd of November, next month also looks likely to start with ongoing elevated volatility.
The ASX200 added to October’s woeful performance, falling another -1% last week, taking the infamous month’s decline to -3.15% with two sessions remaining – bring on Wednesday! Over the five days, the resources helped stem the losers, while the interest rate-sensitive real estate and tech names led the declines. Under the hood, there were some standout moves over the week in both directions as the index posted new lows for 2023
