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US stocks had a tough session overnight ahead of US Jobs Data and ongoing concerns following Jerome Powell’s extremely hawkish Senate testimony earlier in the week, the S&P500 closed down -1.85%. The SPI Futures are pointing to a -1.1% fall early this morning with BHP off 50c in the US while the banks had a tough night dragging the Financial Sector down -4.1%, not a good read-through for the ASX today.
Local equities opened slightly lower with likes of BHP Group (BHP), RIO Tinto (RIO), Mineral Resources (MIN), South32 (S32), CSL Ltd (CSL), and ASX Ltd (ASX) all trading ex-dividend initially weighing on the index. However concerted steady broad-based buying across the market saw over 70% of the index finish up on the day led by some standout performances across the coal and tech names ably supported by a strong day for the banks where we saw NAB, WB,C, and ANZ all pass on the RBA’s rate hike to mortgage holders, this should make Philip Lowe happy! However his recent dovish appears to have ignited some buying into the local market which is continuing to outperform its peers.
We are buying back into SEK in the Flagship Growth Portfolio
Last week saw approvals to build new homes in Australia fall by the most on record as permits for private houses tumbled which implies weak residential property investment will drag on the economy through 2023/4. Total dwelling approvals tumbled 27.6%, as the weak trend continues with permits to build new private sector houses slumping 13.8% – the 5th straight monthly decline and the lowest since June 2012 according to the Australian Bureau of Statistics (ABS).
Equities markets took a hit over the last 12 or so hours following Jerome Powell’s comments overnight as the Head of the Fed turned more hawkish. Traders priced in a larger chance of a 50bp hike at the next meeting following the comments in direct contradiction to his Aussie counterpart Philip Lowe who took a more dovish tone at the RBA’s rate call yesterday. As a result, the USD rallied strongly causing pressure across commodities which was the main drag on the index today.
Tuesday was all about the RBA with the local index basically unchanged at 2.30 pm before surging +0.5% in the minutes following a less hawkish narrative from Philip Lowe et al. The buying through the afternoon was however controlled with over 30% of the ASX200 still closing down on the day with selling most noticeable in the Materials Sector following the disappointing news out of Beijing regarding China’s economic growth over the weekend. With reporting season and the RBA in the rear-view mirror the market should show its hand over the coming week (s).
Bond yields fell, the rate-sensitive 3 years lost 12bps, the Aussie dollar declined and stocks rallied, with the relative sector performances acknowledging what looks to be a very subtle but clear change of tack by our Central Bank.
The ASX200 rallied +0.6% on Monday following a positive lead from Wall Street, the gains were broad-based with over 70% of the main board advancing which was made even more impressive by several stocks trading ex-dividend e.g. Bendigo Bank (BEN), Ramsay Healthcare (RHC) QBE Insurance (QBE) and Iluka (ILU). Ironically the day before the RBA’s set to hike rates for a 10th consecutive time the best-performing sectors were the interest-sensitive names, i.e. Consumer Discretionary +1.95%, Tech +1.8%, and Real Estate +1.7%.
A choppy session that saw the best of it early thanks to a bullish session overseas where stocks continue to climb the wall of worry. Interest rate-sensitive sectors were the driver today with Aussie 3-year yields off 9bps underpinning buying in retail, IT and Property sectors ahead of key central-bank updates headlined by the RBA tomorrow (+25bps expected) & Fed Chair Jerome Powell’s semi-annual testimony to the US Senate on Wednesday.
The RBA is expected to raise interest rates from 3.35% to 3.6% on Tuesday while in the process making it 10 consecutive hikes without any reprieve for those getting increasingly strapped for cash. If the bond market is correct we have 2 more on the menu this year taking the Official Cash Rate back above 4% for the first time in well over a decade.
