Archives: Reports
The Fed has been fixated on inflation over the last year as it hiked Official Interest Rates more than 5% peaking at today’s 5-5.25% target range but we’re finally seeing signs that Jerome Powell et al might stand back and observe the economy for a few months/quarters before raising rates again in 2023:
The ASX200 eked out another small gain last week, finally closing up +0.26% as the sector rotation from value into growth continued unabated even as local 3-year bond yields rallied to their highest close in 10 weeks – we question if the likes of tech can continue to ignore the move in bonds for much longer, especially if it gathers momentum. However, as the EOFY approaches a firm $US and strong earnings from some major tech names have maintained the trend which began in late 2022, last week was a simple case of the “song remains the same” but gains, in particular, became far more stock specific:
The easing of rhetoric around the US Debt Ceiling seems to have lifted markets again today with a broad rally for local shares carrying the index higher into the weekend. 70% of the local bourse closed higher with the Tech sector seeing the best of it for the second day in a row. Financials were the main support for the index while Utilities and Materials were the only sector to close lower. The index added 22pts/+0.31% this week for its second consecutive weekly gain.
The ASX200 rallied over +0.5% on Thursday although again we saw some selling into strength with the market relinquishing ~40% of its early morning gains. Under the hood, we saw over 60% of the market advance with Tech names continuing their march higher, this time helped by the bullish sentiment following a positive earnings report from Xero (XRO) which ultimately closed +8.9% higher, the “tech v Miners” elastic band which MM has been discussing at length recently continues to stretch ever higher.
A solid session for the ASX today, particularly in some areas as good results from Xero (XRO) and a ‘less bad; update from Nufarm (NUF) curated some broader optimism. Tech led the gains today, the local market enjoyed a risk-on shift thanks to improved rhetoric around the US debt ceiling discussions.
We are making several changes to the International Equities Portfolio
MM are making some amendments to portfolios
Fertilizer and explosive business IPL fell -7.8% yesterday giving it the unenviable position of the worst performing stock on the main bourse after its 1H23 earnings missed the mark by around 7-10%, weakness in its fertilizer division received the most blame. Earnings were also hurt by floods and the prices of commodities used to make the said fertilizers, not ideal scenarios with both of the these issues uncontrollable by IPL making their earnings harder to predict. This morning we have briefly looked at IPL and a couple of other related businesses which have endured a tough few months to evaluate if its time to start considering these out of favour names – note we have focused more on the fertilizer side as IPL’s explosives division remains solid.
Another weaker session for local stocks today however ‘buyers of the dip’ saw the local market recover over half of its early losses as it tracked a bounce by US futures, influential names such as BHP and Com Bank (CBA) closed well off their respective lows with the banks in particular catching our attention with ANZ closing positive on the day, while the IT sector followed US counterparts higher.
Global central banks maintained their fight against inflation this month with the Bank of England, Fed, ECB and RBA all hiking interest rates, most moves were expected but the rhetoric has remained on the hawkish side which has restrained equities although they are still largely close to their multi-month highs. The minutes from the RBA’s May meeting did stocks no favours on Tuesday as they reiterated that “further increases in interest rates may be required” although such a move would depend on how the economy and inflation travelled through 2023/4. In our opinion a major risk to the “risk on” trade is markets are looking for a central bank pivot leaving plenty of room for disappointment for the dovish investors:
