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We are buying some stocks into weakness this afternoon across various portfolios
As I’m sure most subscribers know the RBA hiked the Official Cash rate another 0.5% yesterday afternoon making it a stratospheric rise to 2.35% from 0.1% in less than 6-months. More are now likely according to governor Philip Lowe as they attempt to quell inflation providing the local economy with a great platform to emerge stronger over the future years:
The ASX was positive / strong early considering no trade in the US overnight, a more positive session in commodities the catalyst however an 11am peak and all one way traffic from there, with another leg lower following the RBA’s decision to hike rates by another 0.50%.
On the eve of another likely 4th consecutive 0.5% interest rate hike by the RBA, the ASX200 managed to grind higher on a relatively uneventful day considering the last few weeks. The broad-based market was fairly evenly balanced but a +4% rally by the Energy Sector ably supported by a +2% advance across the resources stocks was enough to see the market close in positive territory – the main consistent on the sector level through 2022 has been the strength in the energy stocks.
A positive start to the trading week with the ASX defying the negative lead from the US and weakness in Asia to push higher into the close – Energy the standout as Coal & Oil stocks grind ever higher while weakness was more obvious across the telcos.
Equities have really struggled since the short squeeze/optimism fuelled 2-month rally that ran out of momentum in mid-August, in just 3-weeks the US S&P500 has fallen by -9.7%. It’s very easy to blame Jerome Powell’s hawkish rhetoric from Jackson hole for the decline but stocks were already slipping before he spoke and they’ve extended the declines afterwards with the Resources Sector compounding local losses following Chinas lockdown of Chengdu, another drastic attempt by Beijing to achieve Covid-Zero that feels capable of spreading to other cities. It’s very important that subscribers…
The ASX200 was clobbered last week firstly by last Fridays extremely hawkish statement from Jerome Powell out of Jackson Hole, which sent US 2-year bond yields to 15-year highs, plus the news’s later in the week that China had locked down a city of 21 million people following an outbreak of just 1,000 Covid cases – NSW had 4,169 reported cases yesterday and we’re now even allowing internal flights without masks! Resource stocks were some of the worst hit over the week, especially in the last few days, as iron ore hit a 10-month low and copper looks destined to test its 2-year low:
No one wanted to go home long on Friday afternoon it seems with the ASX 200 losing ~40pts in the last 2 hours of trade, giving back an early lead following a decent recovery from the lows in the US overnight. Employment data is due out tonight and that will have a big bearing on where interest rates go in the short term, market expectations are for +298k jobs to be added while the unemployment rate will stay stable at 3.5% – clearly still a very tight labour market.
The ASX200 has kicked off September in a similar tone to the back-end of August, yesterday’s 141-point drop may have felt particularly aggressive to some observers but we shouldn’t lose sight of the significant influence of BHP trading ex-dividend, it was effectively 33% of the whole markets decline! However, the broad-based selling which resulted in less than 10% of the main board managing to close up on the day would have delivered some definite Spring cheer to the bears. Globally we saw stocks and bonds (rates higher) extend their recent slide as China lockdowns amplified the market’s worries post Jackson Hole.
The market was hit hard today following weakness overseas and a raft of ASX companies trading ex-dividend – BHP had the biggest bearing trading Ex $2.4707 fully franked taking 46pts off the ASX 200, simply a huge influence on our little market these days!
