Archives: Reports
The ASX200 ended last week down another -2.6% taking August’s pullback to -3.5% with nine trading days remaining. Risk sentiment has been significantly dampened by an ever-hawkish Fed and a Chinese economy that is struggling to regain its “mojo” post the country’s severe zero-COVID policy – strict lockdowns have exacerbated issues in the likes of property that were already surfacing in China. Last week we saw the PBOC cut rates for the second time since June.
The ASX200 ended last week down another -2.6% taking August’s pullback to -3.5% with two weeks still remaining. Escalating concerns around the Chinese economy combined with an ever-hawkish Fed saw buyers run for the hills with the influential Financial & Materials Sectors standout detractors ending the week down -3.6% and -4.3% respectively. Only the Real Estate and Healthcare Sectors closed higher over the 5-days with positive earnings as the main drivers in both cases i.e. Goodman Group (GMG) +11% and Cochlear (COH) +11.9%.
A flat end to a tough week for markets with a lot to digest: Better US data drove bond yields higher, China property concerns as news of defaults linger pushed miners lower, while local reporting underpinned rising volatility across the board. Phew, it’s Friday!
The gold price has struggled since its May high with the a recovery by the $US and firm bond yields weighing on precious metals i.e. when you can get 5% on deposit in the bank, gold and its respective stocks need to advance 5% just to match this risk-free rate of return – a far different story to when rates are at zero! At MM we continue to believe that bond yields are at/close to a pivot high that should deliver an improving tailwind to the Gold Sector over the coming quarters.
The ASX fell again today, although some obvious ‘dip buying’ came to pass as reporting season continued to build, while a higher unemployment rate provided further evidence to support a continued RBA pause.
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The US FAANG+ Index has now corrected over -10% from its July high, nothing too sinister in our opinion considering its still up over +65% year to date. The overnight weakness is being attributed to the hawkish Fed minutes but we believe it’s more a case of negative sentiment from China combining with a market that’s rallied very strongly over the last 9 months i.e. its simply being in need of a rest.
Weakness across international equity markets bled into the ASX today with shares trading to a 4-week low. The US market struggled following better-than-expected retail sales prints leading to upwards pressure on rates. This compounded concerns around China’s property market and economic growth outlook which has weighed on equity markets across the region in recent weeks, yesterday’s rate cut from the PBOC only providing short-term relief. Reporting season is now well and truly in full swing while CBA went ex-div today adding to the red on the index.
The initial reaction to the stimulatory move by the PBOC was positive with resource stocks in particular reversing early losses e.g. BHP Group (BHP) rallied +50c from its lows but by the close it had surrendered half of the move to end down -0.3%. The move by the PBOC came in as China suspended reporting youth unemployment rates from August, that’s one way to hide souring numbers. In our opinion, the Politburo, China’s prime decision-making body, will need to pull more levels to turn around their juggernaut economy and consumer sentiment.
The vibe so far in reporting is a net positive one with more beats than misses, and more companies rallying post results despite some festering concern around what’s to come in FY24. That’s not to say everything is positive, but by-in-large, we’re doing okay and this was supportive of the ASX today which snapped a 2-day losing streak. Weaker data out of China continues to put pressure on the PBOC to stimulate, and while it remains largely elusive, the local resource stocks seemed to find some support from intra-day lows on optimism around such a move.
