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Stocks endured a very tough 2nd half to last week following a strong US CPI number which caught most economists on the wrong foot, again – consensus was for inflation to have fallen by -0.1% in August but in fact, it rose by yet another +0.1%. We feel the biggest problem for equities last week wasn’t so much the unexpected positive inflation print but the aggressive optimism fuelled rally that preceded the number:
The last 3-days saw the ASX200 take a 270-point / 3.9% hammering as it followed global equities sharply lower after the US CPI inflation numbers came in well ahead of expectations dashing the markets increasing hopes that the Fed will ease off any time soon from its aggressive hiking path.
The ASX softened into the weekend with two min drivers weighing on the index. Bond yields were in focus again today with Aussie 2 & 3-year yields rising over 2% to put pressure on risk assets. Weakness across commodities also weighed on the local bourse as the energy and materials sectors felt the most pain. It was surprising to see the tech and consumer discretionary sectors outperform despite the volatility again today. The selloff into the weekend took the week’s losses to -147pts/-2.13%.
The ASX200 managed to reclaim a little lost ground yesterday but the bounce was very unconvincing with almost 60% of the main board closing in negative territory – fortunately, the influential banks enjoyed a solid day which offset the more broad-based losses. Elsewhere the Energy Sector continued to defy gravity rallying another +3.7% with all 10 stocks closing up on the day, an impressive performance considering crude oil is still languishing ~25% below its June high.
The ASX recovered slightly today, although the best of it was seen before lunchtime, underpinned by a strong move higher in Energy stocks while financials also found some form.
The ASX200 was clobbered over -2.5% yesterday wiping over $60bn from the local index following steep losses on Wall Street after Tuesday’s US CPI demonstrated that inflation remains stubbornly high. Waking up to a 1300-point rout on Wall Street is enough to scare any investor but we should consider the previous few sessions before throwing the baby out with the proverbial bathwater:
A tough session for the ASX following a stronger than expected inflation read in the US overnight, although a 2.6% decline versus 4-5% in the States could be considered a win! Interest rates sensitive sectors of Real-Estate and IT were hardest hit while the defensives provided some inkling of shelter, although when 193 stocks in the ASX 200 finish in the red, there’s clearly not a lot of positivity to hang one’s hat on.
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The last 4 sessions have seen the ASX200 recover strongly from last week’s early sell-off impressively taking the index back into positive territory for September – to be exact it rallied 4.4% from last Wednesday’s low as investors appeared to “square up” ahead of the overnight US inflation data. Tuesday’s advance was again broad-based with over 80% of stocks closing up on the day led by the Real Estate Sector for a change but it was again the lack of meaningful selling which saw the main benchmark close above 7000. This lack of selling came as no surprise to MM although the rally was stronger than we expected courtesy of a positive lead from the US equities:
