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The market gave back ~95% of Friday’s gains today however it didn’t feel like an overly bearish session with some green tickers emerging throughout the session, particularly some technology stocks that moved a long way up from their session lows while the Real-Estate sector was the best relative performer. US Futures edged higher, the British Pound also gained ~1% during the Asian session implying that rhetoric coming from the new Chancellor is being taken more favourably.
Last week saw another admirable attempt by stocks to rally quickly fade away as investors remembered the looming Fed rate hike on the 2nd of November. On Thursday night US stocks roared higher even as the CPI Inflation print came in hotter than expected but after a report on Friday showed that inflation expectations over the year ahead had risen for the 1st time in 7-months it was one step too far for the bulls to fight the ingrained downtrend and the Dow proceeded to tumble over 400-points, surrendering almost 50% of the previous day’s rally in the process.
The ASX200 closed out the 2nd week of October with a strong +1.75% rally, even after Thursdays US inflation data came in higher than expected, after struggling for most of the week the local index finally ended down just 4-points and impressively up almost 300-points halfway into the infamous month. MM has been repeating our view over recent weeks but the last 24-hours illustrated the point perfectly as we await the latest Bank of Americas Fund Managers Survey we know that this time last month investors cash levels sat at 6.1%, up from 5.7% in August and well above the long term average of just 4.8%.
Friday delivered a very different story to most of 2021/22 with stocks rallying aggressively following a stronger than expected US inflation print. The risk on theme from Thursday night which saw the Dow surge over 800-points followed through locally with the ASX200 posting a solid triple digit gain with losers very thin on the ground as all 11 sectors rallied by over 1%, it might not feel like it but October is now up around 300-points and were still only mid-month.
The ASX200 tried to rally yesterday but nerves ahead of the pending US CPI crept in after midday and the market surrendered its earlier 40-point advance. There were a couple of fascinating moves within the Resources Sector which could just be the start of some meaningful changes to some entrenched trends of 2022, it smells like “the game is afoot”:
A choppy session for the ASX today with weakness bought early pushing the index up ~30pts at its best before we gave up those gains and some by the close – not surprising really given the significance of the data due out in the US tonight with consensus expectations outlined below.
The ASX200 managed to ignore overnight wobbles on Wall Street to close marginally higher on Wednesday courtesy of a stellar session for the banks following an extremely bullish interpretation of the Bank of Queensland’s (BOQ) FY22 result – cash earnings were actually ~1% below consensus but the net interest margin was 2.5% above expectations, costs were lower while the top line increased, the board talked a solid game over the medium-term and as we’ve been discussing over recent weeks there appeared few people left to sell after the regional banks already corrected 35% over the last year, while the…
The ASX tried to rally today and was looking okay before a large seller pushed the index down 25pts in the match as the intra-day chart shows below. US CPI remains the core focus this week, and a higher number will be taken poorly we suspect, while signs that inflation has peaked will likely be met with solid buying.
A week ago the RBA demonstrated some admirable independence by hiking interest rates by a moderate +0.25%, ignoring hawkish rhetoric from other major central banks in the process, it was enough to send local 10-year yields down almost 0.5% to 3.6% and stocks to their best 2-day rally in 2-years. However just one week later the 10’s are back above 4% and the ASX200 has already surrendered 44% of its gains, in our opinion the latter is still a good performance when we consider US stocks are plumbing fresh 2022 lows but the markets “look & feel” is certainly not bullish yet.
The ASX gave up some early strength to close lower today with most action taking place in bond & currency markets which proved the key influence on stocks, the Australian 10-year yield back above 4% while the Australian dollar remained under pressure at 62.75c around our close.
