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We are buying XOM US & FCX US, using 700 HK as a funding vehicle
Our Research Lead made a comment yesterday that the “markets changing its tone like a cut snake!” as yet again on Tuesday we saw the relative sector performance reverse from the previous few sessions following the hawkish RBA minutes which sent investors back into “risk off” mode however I replied with “Remember your time frames H!”, this brief conversation resulted in today’s title and opening few paragraphs as we focus our efforts on optimum portfolio composition for the quarters and years ahead, not just a few days/weeks! The ASX200 is in the midst of its 6th week of rotation around the 6600 area i.e. anyone getting too…
While stocks opened marginally lower, it was the RBA minutes from the last board meeting + Deputy Governor Bullock delivering a speech, both of which signalled sharply higher rates that prompted sellers to kick it up a notch, the IT stocks felt the brunt as did healthcare, two sectors heavily influenced by interests rates while Energy, on the other hand, keyed off a 4.6% rally in Crude prices overnight
The ASX200 enjoyed a strong Monday taking its lead from US indices both on Friday night and the S&P500 futures during our day session i.e. the broad-based US index rallied +1.9% on Friday and the futures were up another +0.7% when the ASX closed yesterday. The buying was broad-based on Monday with over 75% of stocks rallying as “risk on” was clearly the theme of the day with the IT, Resources & Energy Sectors all rallying by over 2% – at least one day this week when the local market followed the MM roadmap! The big news yesterday was ANZ’s acquisition of Suncorp’s bank for $4.9bn which in our opinion added further credibility to yesterday’s advance:
A solid session to kick off the trading weak with the ASX choppy early on before finding its groove around lunchtime and rallying strongly, closing on its high. The risk sectors rallied with Tech, Materials & Energy all adding more than 2% while the defensive areas were used as funding.
This morning we’ve evolved the title of the last two weeks Macro Report from “Here comes the bounce – 1 & 2” to one of two main catalysts which MM can see driving such a bounce although we will touch on both. Firstly, the influential Banking Sector which has been under pressure all year in the US, whereas locally the weakness has only noticeably unfolded from April, on Friday the US KBW Bank Index surged +5.8% following a strong 2nd quarter result from Citigroup which sent its stock up +13% plus Wells Fargo rallied +6.2% after delivering a lift in net interest income. Importantly at least for the next few months we now believe the…
The ASX200 experienced another choppy week which threatened to break out on both the up and downside, but after 2-weeks the broad market remains basically unchanged for July. However under the hood the market’s throwing up some interesting sector rotation, when we consider the extremely hawkish economic data we’ve received from a different number of countries, the outperformance by the likes of tech and healthcare suggests investors are tweaking their portfolios towards “peak inflation” occurring around now, and a possible recession in 2023, the following moves so far this month are certainly pointing this way:
While the ASX ended lower, the intra-day move mirrored that of Wall Street with a sharp sell-off early on followed by a sustained fightback in the latter part of the session, the ASX 200 down ~116pts at the lows before rallying +68points to close the session down 45. Resource stocks the biggest headwind on broad-based selling of commodities overnight while the defensives did their job today.
The ASX200 shrugged off red hot US inflation on Thursday to eke out a solid +0.4% gain with Tech stocks finally leading the line even as bond yields rallied and pundits started weighing up whether the Fed would follow the Bank of Canada and hike interest rates by 1% come their July 28th meeting – it feels almost ironic that markets are convinced interest rates will accelerate higher just as a 3rd wave of Covid casts another dark shadow over the economy. Bond markets are effectively telling us they have very little faith that the Fed can successfully & orderly navigate the current 40-year high inflation rate:
A reasonable day for Australian stocks despite a hotter than expected inflation print in the US overnight – the index opening on the front foot and remaining firm for the session – buying in the technology, energy and materials sectors was the obvious takeaway which certainly suits our current positioning.
