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The ASX showed a decent underbelly today rallying well from the midday low to close only marginally down on the session. US Futures edged higher + the minutes from the last RBA meeting showed a pause on future hikes remains a possibility – both had buyers back from the sidelines, with tech & most commodities enjoying the buy-the-dip mentality – the MM Flagship Growth Portfolio which is skewed to IT & Materials was down ~60bps below the index this morning, before closing ~30bps above it, showing the clear change of trend intra-day.
MM is reducing WDS and buying WHC.
The ASX200 slipped -0.2% on Monday after testing our much-flagged 7200 target level in the morning, the simple problem was the broad market was soft with only 30% on the main index managing to close in positive territory. On the sector front, only the Energy & Materials Sectors closed higher while the tech stocks in particular disappointed after a strong performance by the NASDAQ on Friday night although the intra-day sentiment wasn’t helped by US stock Futures drifting lower throughout our day session. As we’ve been saying a bit of late it was yet another day of two halves:
The market consolidated recent gains today with the ASX opening well before tracking lower as the day progressed. This is the sort of two steps forward and one back trading action we think will play out as the world continues to grapple with a large cross-section of economic challenges, although we reiterate that we remain positive into early 2023.
We started off last week’s Macro Monday Report by focusing on the $US, our conclusion was straightforward and so far it appears on the money:
Friday’s dramatic +2.8% surge by the ASX200 saw the local market close up +3.8% for the week at levels not enjoyed since early June i.e. we’ve already exceeded our target of testing the August highs into Christmas. The weaker-than-expected US CPI lit up equities at the end of last week as hopes increased that the Fed will ease the rate of its interest rate hikes following the painful journey through 2022. Over the 5 days the huge relief rally was primarily focused on the resources stock although the tech names played some decent catch-up on Friday:
Winners: Evolution Mining (EVN) +30%, Sandfire Resources (SFR) +22.3%, IGO Ltd (IGO) +10.8%, and Goodman Group (GMG) +8.6%.
Losers: National Australia Bank (NAB) -2.4%, Whitehaven Coal (WHC) -19.4%, and QBE Insurance (QBE) -0.6%.
MM has been waiting for the final piece of our macro forecast to fall into place and the strong reversal in the $US and bond yields last week following Thursday’s weak CPI appears to be it, if we are correct the growth stocks, led by tech, will now spearhead the market’s recovery into Christmas while companies that enjoy rising interest rates such as QBE Insurance (QBE) and Computershare (CPU) look set to underperform into 2023.
• MM now believes the $US and bond yields have peaked for 2022 following relatively subdued inflation data.
Optimism around US inflation and interest rates extended on Friday night with strong gains in the tech-based NASDAQ and interest rate-sensitive names filtering down across the broad market e.g. Tech +1.7% and Materials +1.2%. Another strong night by commodities should really set the ASX on its way next week, copper +4.9% and oil +2.9% caught our eye, and the SPI Futures are calling the local market up another +0.6% this morning, back towards 7200!
• We continue to believe both US & Australian equities will be higher come Christmas with surprises feeling more likely on the upside.
The US CPI miss lit a fire under global markets sending the ASX to a 5-month high today as bond yields tumbled. The growth end of the market saw the best of it today, tech closing just shy of 5% better on the session. Further weakness in the coal price put more pressure on the energy sector, while Utilities were the only sector to closer lower as heavy-weight Origin (ORG) took some shine off the sector following yesterday’s surge. Overall, it was a strong week for the market, rallying for the third consecutive week, putting on 265pts/+3.85% as all sectors closed higher.
The ASX200 slipped -0.5% on Thursday as a clear break of the 7000 level continued to be one step too far – until this morning! Selling was fairly broad-based yesterday with 65% of the index closing in the red although weakness was noticeable in the influential Resources, IT, and Banking Sectors. However, considering the US market had fallen over 2%, the night before, under the combined weight of inconclusive mid-terms, poor corporate reports, and a tumbling crypto market we felt the performance was ok.
Multiple takeover bids was not enough to get the ASX higher today with weakness across the banking sector following NABs result yesterday & a pullback in the influential resources weighing on the broader market.
The ASX200 rallied another +0.6% on Wednesday basically closing smack on 7000 resistance but to adopt a corny often used phrase it was another classic game of two halves with well over 30% of the main index still closing in negative territory. Plus there were a few sectors such as Tech and Healthcare that sat on the fence, however as we’ve all seen this year the stocks /sectors could switch relative performance positions in the blink of an eye.
