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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).
The ASX200 slipped -0.16% yesterday in the process demonstrating a couple of points we’ve been highlighting of late:
For the third straight session, the ASX rallied through the 7500 level but failed to hold it to the close as profit takers sell into the early session strength. Despite the index closing lower, more than half of the shares in the ASX200 closed higher today, showing the smaller end of town was starting to see some catch-up buying. Tech was the standout sector, helped by a few upgrades at the big end of the sector, while telcos were also better than 1% higher as a sector. Staples and Healthcare were the main laggards today.
January has delivered stellar gains for most stock market investors, the ASX200 has already surged +6.5% outperforming both the UK FTSE +4.2% and US S&P500 +6% although the Chinese CSI 300 Index +8% has caught our attention as markets embrace a “risk on” stance as the world 2nd largest economy reopens following its attempted and failed COVID Zero Policy. The performance of the local market on the sector level so far in 2023 illustrates this point perfectly:
The ASX200 has now advanced +6.5% this month and we’ve still got two trading days remaining for January with Monday set to open back above 7500. The local Tech Sector led the gains last week rallying +2.8% supported by Real Estate +2.5% which was impressive considering that the local inflation data came in far worse than expected suggesting further rate hikes lay ahead but as we’ve alluded to previously news thats “not too bad” is now being embraced by the battered growth stocks. Under the hood the winners and losers circle was made up of 2 very different groups of companies:
After a day off yesterday, the ASX had another day out today, cracking new 9-month highs early on. Despite giving back some of the strength, the market was well supported, if not running into a bit of selling pressure around the 7500 level. Tech and Consumer Discretionary were the standouts, a strange combination of growth and defensive sectors to top the leaderboard.. Energy was the main laggard as coal names were sold off. Overall, the index was up +41pts/+0.56% for the week in its 4th consecutive weekly gain.
The ASX200 slipped 22-points into Australia Day following the fortunes of Microsoft (MSFT US) closely through the US late trading session i.e. MSFT opened up ~5% after its quarterly reports saw a beat on the EPS front however following a muted management presentation the stock reversed to be down -1%, taking the wind out of the sails of a previously strong local Tech Sector which ultimately closed down -1.2% after a promising start. Gold stocks also experienced some noticeable selling with Newcrest (NCM) and Evolution (EVN) both reversing lower after hitting fresh 7-month highs during the morning.
