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The ASX200 struggled yesterday following a poor night on Wall Street coupled with the S&P500 futures pointing to a very shaky start to the week for US stocks, the local index finally closed down -1.4% with over 90% of stocks closing in the red. As expected the growth stocks bore the brunt of the selling following the strong US Employment data on Friday night as they continue to dance to the bond yields tune i.e. rising bond yields continue to weigh on stocks and in particular the likes of tech.
The ASX was lower today following a tough session in the US on Friday. SPI Futures were down 61pts Saturday morning however we opened down more than a hundred as more weakness crept into US Futures. Some backbone became obvious around midday with the market grinding higher for the afternoon before late selling took hold – most support coming from Staples however all sectors finished in the red.
Please excuse the last few month’s fascination with bonds but last week painted a pretty conclusive picture of how bond yields continue to dictate the price of risk assets and in particular stocks.
The ASX200 finally enjoyed a strong week even after surrendering -0.8% on Friday, the local index still rounded out the 1st 5-days of October up +5.5%. I know it’s very early days but the bears shouldn’t dismiss the seasonal strength stocks have enjoyed through Q4 over the last 20-years especially when we consider the weakness through the first 9-months of the year. Last weeks main catalyst for strength in local stocks came from the RBA although US stocks gave a helping hand early on:
The market felt a bit like the weather in Sydney today with a soggy end to the week. The weakness came on the back of comments from the Fed and the ECB staying committed to crushing inflation, though the ECB was a little more dovish than previous comments. Energy was the standout today as oil traded higher – OPEC flagging production cuts earlier in the week despite the market remaining tight triggering a rally in the oil price.
We are selling Tesco (TSCO LN) & buying Blackstone (BX UK)
The ASX200 had a quiet Thursday, especially when compared to the previous two sessions, the index closed up less than 2-points with losers actually slightly outnumbering the winners. Another strong performance by the Energy Sector managed to edge the index higher but outside of the likes of Whitehaven Coal (WHC) and Woodside Energy (WDS) it was a relatively uneventful trading day which felt at its most comfortable trading basically unchanged – no great surprise after already rallying +6.5% from Monday’s intra-day low.
A day of consolidation following a 2.5 day bounce that saw the ASX up an impressive ~6%. Energy the standout sector today with OPEC production cuts supporting prices while Utilities bounced back 1.08% after having been the weakest sector in September, down a whopping 13.8%.
The ASX200 enjoyed another major “risk on” session on Wednesday, we even saw weakness in the US futures ignored throughout our day session as small intra-day dips were bought before they hardly started – no great surprise to MM when we consider how bearish investors & fund managers had become. Readers should remember that last month’s Bank of Americas Fund Managers Survey showed Fund Managers were holding their lowest ever allocation to global equities, or in other words, as we’ve been pointing out who will be left to sell. However, we caution subscribers around becoming too bullish into strength:
Another positive session for the ASX with the market now up ~400pts/6.2% from the low set at lunchtime on Monday when half the country was enjoying a long weekend. As is so often the case, the market made a new marginal low (6411) as stops were triggered before reversing aggressively staging an impressive 2.5-day rally to kick off the new quarter. Interest rates are clearly the main game in town and with some softening of economic data, the window is now open for central banks…
