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The RBA demonstrated some admirable independence yesterday as it hiked interest rates by a moderate 0.25% ignoring hawkish rhetoric from other major central banks in the process, a great call in our opinion! With a large proportion of Australian mortgages going to be linked to the Official Cash Rate by the end of next year there’s undoubtedly going to be a significant headwind for the Australian consumer in the not too distant future, we believe this lag effect is likely to have played a significant role in the decision from Philip Lowe et al.
A very bullish session for the ASX today – the biggest gain in two years – with the RBA raising rates by a more modest 25bps versus 50bps expected. Bond yields fell sharply, the Aussie 3 years tanked 40bps in a heartbeat, the AUD dropped and equities surged, however, stocks were rallying into the move with the ASX up ~150pts before the 2.30pm surprise decision and then went another +100pts after it.
Stocks entered October in the same vein as the departed September i.e. weak and nervous. On Friday night global stocks fell to a 2-year low on growing concerns that hawkish central banks will plunge the world into a recession which by definition will lead to painful earnings contraction for the majority of listed companies. Today at 2.30pm the RBA is expected to hike rates another 0.5% even if they have been considering a more moderate 0.25%, MM believes it’s unlikely they will have the individual fortitude to buck the global trend and ease off on their recent hiking…
The ASX200 tumbled into the close on Friday ending September on the same note as most of the last 6-weeks, the greater than 500-point monthly decline has been primarily instigated by rhetoric from the Fed who turned very hawkish at the end of August following the Jackson Hole economic symposium, and ongoing comments from the board have maintained the pressure on risk assets ever since. Investors started last month focusing on rising interest rates before later worries also started to encompass fears around a recession into 2023, and specifically how deep/long will it be.
A poor way to end a tough month for stocks, with the ASX getting knocked lower from lunchtime onwards, eventually losing 1.2% having been higher in early trade. It wasn’t all bad news with Materials & Energy closing the session higher, however, when the banks fall by an average of 2% it’s always going to be tough going from an index perspective.
The ASX200 finally regained some of its much-needed Mojo yesterday finally managing to close up 92-points even after a sell-off into the close as US futures reversed sharply lower – again! Unfortunately, we remain confident that volatility will remain elevated into October but as we look through the noise MM is looking for ongoing signs that the market’s internal strength and the underlying sentiment are improving. Yesterday’s broad-based gains were a step in the right direction with well over 80% of the main board closing up on the day led by the resource stocks but with selling extremely thin on the ground we actually saw the index challenge the 6600 area early in the day.
A snapback for the ASX today rallying 1.4% although late selling took some cream off the top with the index up ~2% at the peak. Bank of England (BoE) intervention in the bond market saw yields lower and stocks higher overnight while the GBP also rallied, however late today the Pound was back on the skids re-testing recent lows and that led to some selling in stocks – US Futures went from flat to down 0.70% in the last hour of our session.
The ASX200 fell another -0.5% yesterday after trading higher in the morning only to be buffeted lower following comments from the Whitehouse which threw cold water on any potential currency intervention to cap the rising $US plus Apple (AAPL US) announced it had shelved plans to increase iPhone production due to faltering demand, the 2 pieces of news sent US Futures sharply lower, dragging the SPI and local stocks down in its wake. There’s no doubt that at the moment the Fed and most fellow central banks have little concern about the negative impact of their rhetoric on stocks. As we said on Wednesday morning “further news-driven turbulence feels…
Local equities initially defied weak overnight leads to trade high for the first hour. The rally turned sour before midday though with news hitting the wires that the Whitehouse would turn down any talk of currency intervention, and local retail sales data came in higher than expected to further lift the odds of a 50bp hike from the RBA at the next meeting. Coal stocks rallied on the back of strength in the energy markets on news the Nord Stream gas pipelines into Europe…
The ASX200 fought valiantly on Tuesday to finally close up +0.4% on tentative buying and a strong lead from US Futures during our day session however it needed a bounce by the Resources & Energy Sectors to lift the nervous market which still saw the losers outnumber the winners. As subscribers know we increased our exposure to stocks yesterday – I apologise to anyone who didn’t receive the SMS notification, we’re confident this issue will be resolved by Friday:
