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A quick turnaround today as the ASX rebounded more than 100 points to earn back yesterday’s slump. Early strength came from strong leads from overseas markets before RBA Governor Lowe fired up the buyers even more after saying the ‘outsized interest rate hikes’ had likely come to an end. Tech was the main winner as a result, along with real estate and discretionary stocks, while a bounce in iron ore helped support the materials sector.
The ASX200 was simply whacked on Wednesday closing down almost 100-points on fairly broad based selling which saw over 70% of stocks close in the red, losses were led by the influential resources and financials names e.g. Commonwealth Bank (CBA) -2.1%, National Australia Bank (NAB) -3.1%, BHP Group (BHP) -2.7% and South32 (S32) -2.3%. We dipped our toe back into the market in the afternoon, more on those moves later, on balance we feel that Goldman Sachs might be correct with their latest piece of headline grabbing research “Goldman Strategists warn stocks yet to make “decisive” low”:
A poor session for the ASX today with weakness amongst the Energy, Utilities, & Material stocks dragging down the broader market while IT & Healthcare edged higher. That in itself tells an interesting story given bond yields traded sharply higher overnight (US 10 years +15bps) while a similar but less aggressive trend played out in Australia today (Aussie 10 years +5.5bps). Higher value IT & Healthcare generally struggle under that scenario however today they benefitted from a move out of those sectors more exposed to global growth – Energy & Materials hit by more than 2% a pop.
We are buying some stocks into weakness this afternoon across various portfolios
As I’m sure most subscribers know the RBA hiked the Official Cash rate another 0.5% yesterday afternoon making it a stratospheric rise to 2.35% from 0.1% in less than 6-months. More are now likely according to governor Philip Lowe as they attempt to quell inflation providing the local economy with a great platform to emerge stronger over the future years:
The ASX was positive / strong early considering no trade in the US overnight, a more positive session in commodities the catalyst however an 11am peak and all one way traffic from there, with another leg lower following the RBA’s decision to hike rates by another 0.50%.
On the eve of another likely 4th consecutive 0.5% interest rate hike by the RBA, the ASX200 managed to grind higher on a relatively uneventful day considering the last few weeks. The broad-based market was fairly evenly balanced but a +4% rally by the Energy Sector ably supported by a +2% advance across the resources stocks was enough to see the market close in positive territory – the main consistent on the sector level through 2022 has been the strength in the energy stocks.
A positive start to the trading week with the ASX defying the negative lead from the US and weakness in Asia to push higher into the close – Energy the standout as Coal & Oil stocks grind ever higher while weakness was more obvious across the telcos.
Equities have really struggled since the short squeeze/optimism fuelled 2-month rally that ran out of momentum in mid-August, in just 3-weeks the US S&P500 has fallen by -9.7%. It’s very easy to blame Jerome Powell’s hawkish rhetoric from Jackson hole for the decline but stocks were already slipping before he spoke and they’ve extended the declines afterwards with the Resources Sector compounding local losses following Chinas lockdown of Chengdu, another drastic attempt by Beijing to achieve Covid-Zero that feels capable of spreading to other cities. It’s very important that subscribers…
The ASX200 was clobbered last week firstly by last Fridays extremely hawkish statement from Jerome Powell out of Jackson Hole, which sent US 2-year bond yields to 15-year highs, plus the news’s later in the week that China had locked down a city of 21 million people following an outbreak of just 1,000 Covid cases – NSW had 4,169 reported cases yesterday and we’re now even allowing internal flights without masks! Resource stocks were some of the worst hit over the week, especially in the last few days, as iron ore hit a 10-month low and copper looks destined to test its 2-year low:
