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Another strong day for equities today with the 4th consecutive session in the black taking the index back over 7000. The index has now rallied around 280 points in just 4-days in a swift recovery from Last Wednesday’s rout. Real Estate led the way as bond yields came off, also helping the consumer discretionary sector. Tech couldn’t follow suit, however, that was largely due to stock-specific issues driving the underperformance of the sector. The weakest was healthcare. The focus now turns to US CPI tonight with the market looking at a fall of -0.1% MoM.
The ASX200 has enjoyed a strong start to the week with yesterday’s +1% taking the index back to almost unchanged for September following the major jitters early last week – in today’s market a week is clearly a long time! Buying was broad-based on Monday with well over 70% of stocks advancing led as was expected by the Resources Sector e.g. Sandfire Resources (SFR) +3.6% BHP Group (BHP) +3.5% and Fortescue Metals (FMG) +3.3%. There was some very interesting news out of Ukraine over the last 24 hours which the market seemed to largely ignore probably because it can be interpreted in a number of different ways:
Equities started this week where it left off, with buyers in full control for the Monday session. Supported by strength in commodity markets and a strong US session on Friday night, the ASX managed a 1% rally today. Materials were the standout sector with rumours of Chinese stimulus helping support commodity markets, while four other sectors were also up more than 1%. Healthcare was the only sector in the red to start the week.
Equities managed to rally in the face of adversity last week after a tough 3-weeks, there was no major bullish news around but even as US short-dated yields continued to test 15-year highs the growth stocks enjoyed a sharp recovery post aggressive falls on Monday and Tuesday to end higher for the week:
The ASX200 went on a rollercoaster ride last week with major swings in both directions as volatility reigned supreme, we saw a clear week of 2 halves with a strong rally on Friday ultimately resulting in a +1% gain for the index over the 5-days – a very impressive outcome considering where stocks finished up on Wednesday. In typical fashion post Covid it was central banks which drove the significant swings in market sentiment across stocks, bond yields, FX and commodity prices.
The path of most pain continues to be up as the market pressed higher again today. Buyers were out in force throughout the session, consistently pushing the index higher throughout the day. Resources were the winners thanks to rebounds in iron ore and oil. Defensive sectors of Staples and Real Estate were firmly lower highlighting to risk on-attitude of investors.
Moving back to the markets, the RBA finally injected some optimism into stocks on Thursday after Governor Philip Lowe suggested the market needs to downgrade its projected path for rate hikes into 2023 – remember MM is looking for the Cash Rate to top out ~3% whereas the market was previously looking for a move closer to 4%. Our “best guess” is the RBA will now only hike 0.25% in October & November before giving people a reprieve in December hoping to add to the Christmas cheer i.e. the Official Rate will be 2.85% going into 2023.
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.
