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The ASX200 rallied another +65-points, or +0.9%, last week with most of the gains coming on Friday courtesy of the major banks, as most people know Commonwealth Bank (CBA) is now trading at an all-time high. However, while the index is clearly strong the story beneath the hood remains extremely mixed:
Winners: healthcare, tech, building and property e.g. CSL Ltd (CSL) +11.4%, SEEK (SEK) +9.8%, Xero (XRO) +8.9%, James Hardie (JHX) +9.5% and Goodman Group (GMG) +5.2%.
Losers: energy, insurance, resources e.g. Woodside Energy (WDS) -2.2%, IAG Insurance (IAG) -6.9%, IGO Ltd (IGO) -7.4% and BHP Group (BHP) -3.3%.
A bullish day to end another positive week for equities taking the ASX 200 to within less than 1% of its all-time high. Strength across the tech stocks in the US overnight permeated into the local market again today, however what really caught or eye was CSL finally breaking out on a flow of broker upgrades while the Real-Estate sector is now heating up.
We are trimming MQG & selling SEK.
The ASX200 ended yesterday’s mixed session up just 10 points but under the hood, it was a very eventful day even while the market maintained its magnetic attraction to the 7500 area. The interpretation of the Fed’s 0.25% rate hike and accompanying rhetoric delivered some very different performances on the stock & sector level:
The ASX 200 is up nearly 7% in calendar 2023 but is now looking very tired/uncomfortable above 7500. The best of today’s trade was seen early with the index +47pts at the high, hitting 7548, only ~1% from its all-time high, but with BHP down 1.4% on the session and the banks rolling over into the close.
The oil price has been range trading over the last 4 months albeit near the lower level of prices for the last 18 months. The US Energy Sector has significantly outperformed its Australian peers over the last year and although we believe both sectors are now looking tired its MM’s view that better risk/reward is now on offer locally however we’re conscious that in both absolute and relative terms trends have been extending post Covid hence we’re adopting a neutral bias at this stage until the next cycle shows its hand.
A strong lead from US markets took the ASX to another 9-month high today, however, early strength was once again sold into.
MM are selling PNI in the Emerging Companies Portfolio.
The local resources stocks have only slipped -2.3% from their January high but it feels more with a few prominent names on MM’s radar well below levels scaled over recent weeks e.g. South32 (S32) -6.8%, Mineral Resources (MIN) -8.3% and now after yesterday’s disappointing result IGO Ltd (IGO) -11.5%. As we said in the Tuesday Match Out Report when we reviewed IGO’s miss – “Downstream cost pressures are to blame which we think will be a common theme through this upcoming reporting period for the miners”. If this opinion proves correct and the $US can bounce back towards the 105-107 area the 3 pullbacks mentioned could easily double in a market that MM believe is complacently long miners.
The market was supported early on however a flow of negative company updates (generally at the smaller end) and a softer-than-expected Retail Sales print at 11.30am had the sellers re-loading and the ASX 200 fell back below 7500 for its 4th straight session. The defensive sectors were the place to be, the supermarkets rallied on a broker upgrade while the tech sector struggled after another lacklustre update from Megaport (MP1).
