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A softer session across the ASX today despite the positive session in the US overnight, and US Futures remained solid during our time zone, inline with other Asian markets bar our own. We were a bit of an anomaly today.
The ASX200 rallied +0.7% on Wednesday, closing back above 8700 and within 0.4% of its all-time high. Buying was broad-based, with over 70% of the index closing higher. Although Paladin (PDN) and Telix Pharma (TLX) delivered a couple of negative surprises, bullish sentiment continued to prevail with all of the big names from banks to resources advancing.
The index climbed steadily higher throughout the day with the resources rally continuing and banks rebounding after two days of moving in opposite directions. With CBA closing ~10% off its recent highs yesterday, it was a matter of time until buyers returned, though ANZ was the pick of the bunch in the Big Four.
The ASX200 struggled to close up +0.1% on Tuesday, with over 40% of the main board closing lower, and notable weakness in the influential banking sector.
While it was quiet session from an index perspective, we saw further sector rotation sweep through the ASX with Materials outperforming Financials by ~4%, and if we look at the last 5 trading sessions, that divergence extends to ~7%. Resources are running as the market consolidates its recent breakout above 8600.
The ASX200 closed down more than 1% on Monday, enduring its worst drop in three months. The last two trading days have seen similar see-saw action to a pair of days in early April, hopefully it’s not a precursor of the volatility ahead!
We’ve written about sector rotation a lot in recent notes and today was another clear example of the theme playing out, with banks underperforming resources by a significant ~2.5%. News that Warren Buffett was selling down bank holdings was sighted as a catalyst, and it probably played a part.
Since April, global indices have shrugged off bad news almost with disdain, leaving many pundits looking for new reasons to justify a potential fall in stocks. Most importantly, for all the political noise and recession warnings, the linchpin US economy remains resilient, allowing markets to scale new heights.
The ASX200 rallied another +2.1% last week, posting a fresh closing high on Friday, extending July’s gain to +2.5%. Gains were broad-based over the five days, with all 11 of the main sectors closing higher, led by Tech and healthcare, which surged +5.2% and +4.8% respectively. The trend remains clearly bullish, and while the average gain for the month of July over the last decade is around 3% equities are breaking to new highs with strong momentum, and as we mentioned on Friday morning, the surprises in markets usually unfold with the trend – the best two Julys of the last decade have delivered gains closer to 6%.
Bang! The ASX broke out of its recent tight trading range today, trading above 8700 for the first time, buoyed by coordinated buying across the material and healthcare sectors, with technology also having a good crack. Softer employment data yesterday brings into play 3 rate cuts this side of Christmas, which is a bullish catalyst, however, today looked more momentum driven, with a clean break above a 6-week trading range, dovetailing in with low school holiday volumes – a quick trip into the city this am and a strong market – a win/win
