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The ASX200 tumbled over -1% yesterday after Commonwealth Bank (CBA) dragged both the sector and index lower, by the close the “Big 4” banks were responsible for over two-thirds of the main index’s 78-point fall. During the day we saw noticeably large volume through the futures market as nervous investors appeared to move to the sidelines following the market’s +9.6% rally from its early January low – in just 8 trading days the local market has surrendered over 200 points or 3%.
The market was hit today as the influential banking sector weighed heavily on the index, accounting for ~2/3rds of the day’s decline. It actually wasn’t too bad elsewhere with 50% of the ASX trading higher, but when the average decline of the Big 4 is ~4.5%, it’s always going to be tough going.
The ASX200 followed US indices higher at the start of Tuesday but from 10.30 am onwards it slowly but surely slipped lower losing almost 80% of its original gains, a couple of big hits on the stock level appeared to weigh on overall sentiment e.g. Star Entertainment (SGR) -13.5%, Ansell (ANN) -8.7% and Breville (BRG) -4.7%. Earnings season hasn’t helped a tired market that’s already rallied +18% from its October low, however, it’s been interest rate expectations that’s weighed heaviest on risk assets over recent weeks, yesterday we saw NAB forecast that the RBA would hike rates up to 4.1% and suddenly we have a new “handle” that is largely being accepted.
The market opened with a bang this morning keying off a positive night overseas, however, the best of it was seen early with results more often than not underwhelming, while key US inflation data is due out tonight (6.2% YoY expected), and that will have a big bearing on the direction of stocks from here.
The ASX200 slipped -0.2% yesterday but in a similar fashion to US stocks on Friday we saw some buying surface into the close, especially through the futures. While the local market was down all-day only 55% of the main board closed lower although there was a negative undercurrent to proceedings as the Consumer Discretionary stocks continued to struggle, their woes were compounded by a bearish outlook from JB Hi-Fi (JBH) which saw the electronics retailer tumble over 5% – more on this later.
A quiet session to kick off the trading week with the Super Bowl taking centre stage as the Kansas City Chiefs knocked off the Philadelphia Eagles 38-35, in a very close contest.
We are adding to our coal exposure across two portfolios.
Both the Fed and RBA have raised interest rates this month as expected, however, the accompanying hawkish rhetoric caught many people calling interest rates close to a peak off guard plus moves were compounded by some recent strong economic data which has stoked the fire that interest rates will both go and stay higher for longer.
The ASX200 surrendered some of its 2023 gains last week finally closing down -1.65% with the 7400 support area suddenly the closest psychological level as the market appears to have simply run out of steam after surging +9.6% from its early January low. Last weeks weakness was broad based with all 11 sectors falling but the largest declines were in the interest rate sensitive real estate, IT and Healthcare stocks whereas the financials who often see improved margins/earnings through periods of rising interest rates were the best on ground, but they still slipped -0.35%. Central banks have again delivered the backdrop which has doused the markets recent mojo:
A soft end to a tough week for stocks with the market down 1.65% across the five sessions – all sectors finishing lower with Real-Estate (-5.77%) suffering most at the hands of the RBA following a 25bps increase in cash rates, but more importantly, they guided for more to come.
