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The ASX200 rallied another +0.3% on Monday courtesy of China’s reopening shift which propelled resource stocks higher on hopes that the global economy can avoid a deep contraction in 2023, unfortunately, the move caused the market to polarise as bond yields rallied in line with the optimism towards the growth outlook. The move in bonds resulted in over half of the market closing lower but when the heavyweight resources advance strongly the market often ignores the crowd:
The ASX kicked off the week on the front foot today with Energy & Material stocks pushing the market higher in what was a fairly subdued session. It’s certainly starting to feel more like Christmas as volumes from here start to slide, and moves become more exaggerated, an example today was Elders (ELD) on the downside after UBS cut its recommendation.
Most people think 2022 has been an awful year for equities but performance has actually been very stock/sector-specific, it hasn’t been an annulus horribilis for broad market investors. The ASX200 will commence its run towards Christmas this morning down less than 2% with dividends for the average portfolio more than making up for the slight fall. Last week we saw dovish comments from Fed Chair Jerome Powell weigh on bond yields and the $US which in turn ignited the interest rate-sensitive pockets of the stock market which could easily see the ASX close up for the year:
The ASX200 closed out last week on the back foot although it still added +0.6% for the 5-days with gains in resources and tech stocks more than offsetting weakness in energy and discretionary retail names. The main story last week was the dovish comments from Fed Chair, Jerome Powell which led to weakness in the $US and bond yields as rate-sensitive stocks/ sectors benefitted accordingly:
The combination of the weak $US & falling bond yields set the resources alight – IGO Ltd (IGO) +8.6%, Newcrest Mining (NCM) +5.5%, South32 (S32) +4.2% and BHP Group (BHP) +3.5%.
The dovish rhetoric from Jerome Powell sent many tech stocks soaring – Xero (XRO) +8.8%, Seek (SEK) +7.9%, REA Group (REA) +5% and Altium (ALU) +3.6%.
Last week may have been all about the Fed but the coming week is the RBA’s turn to take centre stage as they make their last interest rate move, or not, before February:
Some weakness crept into the broader market today however the selling was quite targeted with 45% of the index still making gains. For the week, good gains in Materials & IT offset weakness in Energy & Discretionary Retail, the market adding ~0.6% overall.
The ASX200 surged higher on the 1stday of December as it celebrated Jerome Powell’s first meaningfully dovish comments of 2022, the result on the stock level was very much as expected with interest rate sensitive names finally hogging the limelight e.g. four stocks held at MM soared higher, Evolution Mining (EVN) +6.3%, Xero (XRO) +6.2%, James Hardie (JHX) +5.4% and Sandfire (SFR) +5.2%. We have been positioned for such a move for over a month so let’s hope it’s not a “one and done” knee-jerk rally following the Fed Chairs speech.
• “The time for moderating the pace of rate increases may come as soon as the December meeting” – Jerome Powell, Chair of the Fed Reserve.
The gains were broad-based across the market with over 75% of the main board closing in positive territory, only the Energy & Healthcare Sectors closed down on the day which saw the ASX200 trade within 3.6% of its all-time high posted in August of 2021 – what bear market! The defensives are not surprisingly the main area dragging the chain which could provide MM with some excellent switching opportunities when we feel its time to migrate back down the risk curve:
US stocks rallied late in their session to close ~3% higher, while the Nasdaq put on ~4.5% as technology stocks enjoyed the rhetoric from the Federal Reserve around interest rates.
MM is buying EVN
We’ve already seen some massive squeezes through July/August this year with Zip (Z1P) coming to mind but with the ASX already knocking on the door of its all-time high, we question what stocks/sectors investors will remain comfortable chasing higher with 7600 less than 4% away from where we are set to open this morning – the bears clearly are not enjoying the last quarter of 2022.
A good day for the ASX to end what has been another stellar monthly performance, the ASX 200 advancing +6.75% (incl dividends) in November led by a ~20% advance by Utilities but more importantly, a 16.3% rally in Materials. All sectors were higher in the month with the bears clearly licking their wounds – and there are plenty of them around!
Today it was more benign inflation that got the buyers going again following a soft first hour or so of trade, the ASX 200 ultimately rallying +60pts from the morning lows with Energy, Materials & Property the standouts.
The S&P/ASX 200 added +30 points /
