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The ASX200 rallied strongly on Wednesday following the positive lead from the better-than-expected US CPI inflation print, we believe bond yields have peaked for now although the Fed have work to do even if the worst of US inflation may have passed. Stocks/sectors are taking some heart from recent Fed comments and Tuesday’s benign CPI read as we see some reversion to the dominant trends of 2022 start to slowly unfold, yesterday fitted into this story under the hood i.e. banks and resources were mixed while the tech stocks gained some traction.
Lower rates likely in the US after a more benign inflation print overnight put some heat under our market today with the rate-sensitive areas doing best. 11.30am saw the low for the day before we ground steadily higher throughout the session.
Stock markets across the region rallied yesterday before last night’s much anticipated US CPI print that confirmed the heat is coming out of US inflation, just like it is in Australia, and the most aggressive tightening of monetary policy in history is working. Overnight, US headline inflation came in at 7.1% for November, down from 7.7% the prior month and below the 7.3% expected by the market. Stripping out the more volatile food and energy, core inflation was 6%, down from 6.3% and below the 6.1% expected. This created some fireworks in bond markets overnight, Treasuries…
The ASX traded higher today although fell away from its best levels seen in early trade – weakness amongst the resource sector the major influence at the index level with BHP & Fortescue alone taking ~20 points off the index.
MM are buying DXS
The ASX200 slipped another -0.45% on Monday on broad-based selling which saw well over 60% of the main board close down for the day with the resources coming off the boil catching our attention after we trimmed our exposure last week. Elsewhere in what felt like a fairly quiet day with central banks sitting poised to dominate the news some buying crept into the tech space but there have been many false dawns on this front through 2022:
A softer session for the ASX ahead of a big week of data in the US including inflation (14th) & then their much-anticipated interest rate decision (15th) where they should at least slow the pace of rate hikes (50bps expected), however as we suggested this morning, it is not just about the size of the incremental move but also the accompanying rhetoric with hints towards what Jerome Powell et al feel is likely in 2023, another…
The combination of inflation, interest rates and bond yields have driven equities post-Covid, as global uncertainty escalated through/after the pandemic the RBA and US Federal Reserve cut interest rates to basically zero which propelled risk assets, including stocks, to fresh all-time highs. Unfortunately, the inability of these central banks to take some medicine early on and start slowly raising rates from say late 2020 has seen the inflation genie escape the lamp and the rest is already history i.e. the steepest, most aggressive series of interest rate hikes in history.
The ASX200 bounced into the close on Friday but it wasn’t enough to prevent an 88-point decline over the week, the selling was broad-based across the 5 days with some strength in the gold and defensive stocks unable to halt the -1.2% dip. The local index was trading around 7320 just before the RBA’s 0.25% rate hike last week after which we expressed the view that it would take 1-2 weeks for stocks to put the move into the rear-view mirror, perhaps the buyers will return next week with Christmas only a fortnight away.
A solid end to a soft week for stocks with buying amongst the resources offsetting weakness elsewhere – the ASX 200 back up through 7200 as buyers of the ~200 point pullback emerged.
