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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.
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.
