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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:
MM is buying Disney (DIS US)
Stocks snapped a 3-day losing streak today that had seen the ASX 200 pullback -371pts / 5.5%, back down testing the June lows, off 12% this calendar year to date. While today’s bounce back was far from convincing, we are seeing signs of some improvement with a number of sectors/stocks attracting strong buying. When we stand back and consider the overarching positioning at the moment, with the consensus being very bearish, we think a bounce from these levels is the more probable outcome.
We are amending the Flagship Growth & Income Portfolios
The ASX200 tumbled another 105-points yesterday closing less than 1% above this year’s low posted back in June, Monday’s selling was specifically focused in the Energy & Resources Sectors e.g. Whitehaven Coal (WHC) -14%, Woodside Energy (WDS) -5%, IGO Ltd (IGO) -7.6%, South32 (S32) -7% and BHP Group (BHP) -5.2%. Interestingly the market’s weakness wasn’t very broad-based for such a disappointing session with over 25% of stocks and 45% of sectors managing to close in positive territory – more on the divergence later.
A downbeat start to the new trading week with the ASX off more than 1%, although it wasn’t all bad news with some pockets of strength emerging as the day progressed pushing the index +50 points above the early morning lows. Healthcare was a standout +1.97% while recessionary fears led to declines in Energy (-6.30% and Materials (-5.27%).
Equities are experiencing a September to forget and although most indices haven’t yet broken below their June lows things are “feeling” worse this time around e.g. the S&P500 closed on Friday 1.6% above its mid-year low but the Dow ended the week at fresh lows for 2022. There was no really good news on either the macro-economic or geopolitical front but we feel it was a trifecta of semi-left-field news that sent stocks reeling e.g. the S&P500 tumbled -4.6% and while the ASX200 fared better only falling 2.4% it’s set to open down another -1.25% this morning. The problem for stocks came from 3 different continents which combined with rising interest rates created a major headwind for risk assets:
The ASX200 tumbled into the Feds FOMC meeting on Wednesday only to compound the losses throughout an awful session on Friday which ultimately resulted in the local market falling over -2.4% for the week, with all 11-sectors closing lower led by the interest rate sensitive Tech, Utilities, Real Estate and Consumer Discretionary Sectors – all of which fell around 5%, or more. The Fed and Bank of England combined forces to dash market hopes that interest rates were approaching their peak, if anything the fight against inflation has been ramped up:
The Fed hiked rates by 0.75% and the BOE by an aggressive 0.5%, which poses the question what next from the RBA in 2-weeks’ time?
The big shake up from the Fed was delivered by its rhetoric – Jerome Powell said that a “soft landing for the US economy will be very difficult to achieve” i.e. buckle up for a recession.
The rout in the ASX resumed today after yesterday’s holiday. Weakness in risk assets came on the back of rate hikes from the US Fed (+75bps) and the BOE (+50bps), while the FOMC Chairman also warned of a recession. Today the market was concerned with a hit to earnings expectations and the higher discount rate that comes with a hawkish Fed. Materials held up in the face of the selling as iron ore found some support thanks to improving construction activity in China and the hope for further stimulus here.
