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It was a pretty muted session from the index point of view today with very little to drive markets following the US observing Memorial Day today. Real Estate gave back much of yesterday’s outperformance, followed by weakness in coal stocks weighing on the Energy sector. Banks were also marginally lower today, partly offset by strength in Telcos.
In April we looked at the Australian Property Sector concluding that we felt that value was returning to the sector following its more than 30% correction since January 2022. We are all aware that whether it be residential, or commercial, that property has struggled for over a year as a result of surging interest rates i.e. not that long ago you could fix a 4-year home loan at 2%, today the same loan is well over 5%.
The local market was on the front foot early, jumping almost exactly +100pts/+1.4% on the open today following a tentative deal on the US debt ceiling. The ASX followed a positive move from the US on Friday night with US Futures adding to gains during trade this morning, however, the rally was sold into with the S&P500 Futures currently trading ~0.5% from the session highs. Tech in particular finished well of intraday highs after some profit-taking kicked in.
Markets are expected to open strongly this morning following the welcome news that a US debt default has been averted with yet another last-minute deal, these politicians have the timing of a Hollywood thriller! The announcement wasn’t serenaded with any celebratory fireworks as the tentative agreement to raise the debt ceiling over the next 2-years was clearly an uncomfortable compromise by both parties to get it before Congress for the final tick of approval.
Investors remain very concerned that a recession is approaching fast which hasn’t been helped by the ongoing political bickering around the US debt ceiling between Biden and McCarthy. We still believe the balance of probability is skewed heavily to a compromise which will send the US S&P500 to fresh 2023 highs but the ASX200 looks far less likely to challenge its equivalent levels as both the influential banks and resources weigh on the index, our index simply isn’t weighted as heavily towards the tech sector as the U
A quiet end to a busy week for markets with competing factors creating some big divergence across sectors. For the week, the ASX 200 fell by -1.68% while the Small Cap Index was off by -2.86% – smalls still can’t take a trick! These moves however underplay the variance across sectors with IT up +4.7% contrasted by the Materials sector which fell 3.45%.
On a day when the ASX fell over -1% the building stocks stood out to us as the main 4 winners in an otherwise especially tough session for the Materials Sector. The Australian building products names haven’t fared as well as some of their US peers but they’ve certainly managed to bounce strongly in 2023 after being smashed more than 50% in some cases, the question we ask today is should we be taking some profit after their strong moves?
A tough day for stocks with the heavy-weight sectors of Financials & Materials causing most of the pain. Despite the index finishing down ~1%, only 65% of stocks actually closed lower with the technology sector enjoying a phenomenal update from global chipmaker Nvidia (NVDA US) after the US close this morning – a stock we discussed this week here. That pushed Nasdaq Futures up +1.5% underpinning a 2.4% move higher from the Aussie tech sector.
US stocks fell again overnight as the debt ceiling debate drags on plus minutes from the recent Fed meeting showed members were split on whether to hike interest rates in June. The dust is settling after the Banking Crisis only to be replaced by the debt impasse, considering what’s been thrown at equities recently they’re holding reasonably well but the upside feels limited whenever the S&P500 tests the 4200 area.
