Archives: Reports
The theme through most of 2023 has been the strong getting stronger and vice versa and this is playing out early this reporting season with buyers showing no interest in buying dips after a disappointing result – not classic bull market price-action but very befitting of one of the most hated bull markets in history. This morning will see a big test for the financials with investors needing to digest Commonwealth Bank (CBA) and Suncorp (SUN) results this morning.
The day started well with some reasonable buying across most major sectors however by midday, things had taken a turn and optimism was thin on the ground. A mixed bag from companies that reported results ahead of Commonwealth Bank (CBA) out with numbers tomorrow morning – we’ll cover them as they land.
Although it often gets less attention, what to avoid is as important as what to buy and with MM looking for a major rally in bonds/pullback in yields the performance baton is likely to change hands a few times during the 2H. Following moves which caught our attention over recent sessions we thought today was an ideal time to revisit 3 sectors we are cautious towards due to their defensive nature &/or preference for a higher interest rate environment.
A subdued start to the week with the ASX edging lower, void of any real impetus in either direction. A bank holiday, no influential companies reporting and a softer night on Friday in the States saw local investors sit largely idle, with winners and losers split evenly across the main board.
When all of the news went into the mixing pot bonds continued to follow the MM roadmap with US 2-Years slipping to 4.76%, well below both their July 5.1% high and the current Fed Funds target range of 5.25%-5.5%, on the equities front, we saw some weakness flow through from reporting season which was compounded by strong moves from some stocks ahead of their reports.
The ASX200 ended the week down only -1.1%, it certainly felt much worse over the course of the 5 days following the downgrade of US Debt by rating agency Fitch. The yield-sensitive sectors dragged the market lower with the Utilities -3.4% and Real Estate -2.5% dominating the loser’s enclosure while only the Consumer Discretionary Sector closed higher. Longer-dated bond yields rallied into Friday’s US Employment data which is likely to have weighed on both of these sectors which have been looking for an end to the hiking cycle by central banks – a reversal of this move by bonds following a pretty benign jobs report is likely to see the stocks/sectors also reverse.
A quieter end to a more volatile week for equities with a US rating downgrade, continued volatility in bond markets, while overlapping quarterly earnings in the US and the start of FY reporting locally kept things interesting. Ultimately, stocks ended lower, bond yields were generally higher while commodities by in large remained resilient.
The Australian consumer is under pressure from both rising prices (inflation) and interest rates and this is translating to reduced spending at the supermarket, household goods appliances to takeaway food. Theoretically, the often referred to mortgage cliff is about to hurt homeowners hard which could see the average Australian continue to think twice before spending. A couple of pauses by the RBA should help, but we believe discretionary spending is unlikely to improve significantly until people feel more comfortable as to what comes next on the economic front.
The ASX was down in line with overseas markets, although the selling was far from aggressive and we did bounce off the session lows. US Futures were subdued while Asian stocks were more mixed after a poor session yesterday.
Yesterday’s price action reminded us of August 2011 when another credit rating agency S&P downgraded the US debt from AAA to AA+, only days after Washington narrowly averted a default citing heightened political polarization and insufficient steps to right the nation’s fiscal outlook.
