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The local market copped its biggest hit since February today, falling to a 6-week low after the US market tumbled overnight. Yields were higher again, on the back of the BOE raising rates and also talking to the chance of inflation hitting 10%+ in the final quarter of the year. Tech was the hardest hit, real estate a near second place on the back of the rally in yields. Despite the savage selling, consumer staples held up well to only finish marginally lower.
The ASX200 embraced the Feds milder rhetoric on Wednesday night and in particular their comments which suggested that aggressive 0.75% hikes were unlikely through 2022 i.e. interest rates are going up but not as fast as many feared. Local bond yields retreated substantially on the news with the 3-years falling almost 0.25% from Wednesdays 3.17% high, MM has been looking for bond yields to consolidate their strong advance over the last 5-months and this week’s rate hikes by the RBA & Fed plus not too hawkish comments feel like they may have heralded such a move:
A reasonable session for the ASX today up ~0.80%, although that was against a backdrop of US stocks that rallied ~3% overnight following the US Fed’s more dovish tone around rates. We’ve written a lot around the markets aggressive positioning on interest rates, our belief that markets were ahead of themselves and a pullback in yields played out overnight, a theme that was also obvious locally today.
The ASX200 failed to hold onto early gains yesterday which was a disappointing performance following a solid result from ANZ Bank (ANZ) which helped the influential Banking Sector buck the markets trend i.e. the “Big 4” posted an average gain of 0.7%. However the resources stocks, amongst others, drifted lower throughout the day damaging both sentiment and the index in the process, investors feel more comfortable selling pockets of market strength as opposed to buying weakness although we shouldn’t jump too aggressively on the medias “bear bandwagon” considering the local markets still only 4.3% below its all-time high after being hit with a barrage of macro headwinds through 2022.
The market was strong early keying off a better night overseas and a good update from ANZ which had the banking sector on the front foot early, however as bond yields continued to climb thanks to a stronger than expected retail sales print + Asian markets fell, the ASX lost its early optimism, ending the session marginally lower.
The ASX200 fell -0.4% yesterday as the RBA hiked rates slightly more than expected to 0.35% but interestingly we saw the value stocks dip slightly while tech in particular enjoyed a strong session. However, interest rates have been destined to go higher for months and while yesterday’s move was more aggressive than most economists anticipated it was always a matter of when and how fast as opposed to if they were going significantly higher. The need for the RBA’s record ultra-low COVID 0.1% rate is well and truly in the rearview mirror and MM believes the RBA effectively-acknowledged they’ve let themselves get behind the curve at 2.30 pm, on Tuesday:
The ASX pulled back today weighed by weakness amongst the resources while the property stocks factored in higher interest rates, and fell. The RBA the main game this afternoon, increasing rates for the first time in nearly 12 years upping the cash rate by 25bps to 0.35%, the market fell because the increase was a tad more than expected (15bps) however it should come as no surprise to investors, 2 year Aussie bond yields are at 2.75% while the 10 year is at 3.4%.
MM are amending our Flagship Growth & Active Income Portfolios
The ASX200 kicked off the infamous May on the back foot slipping -1.2%, overall not a bad performance considering the S&P500 fell over -3.6% on Friday night taking it down over -9% for April, we closed the month basically unchanged. All 11 market sectors declined yesterday and I feel like a broken record stating that the weakness was again focused in the IT Sector as it plunged another 4%, all 14 stocks fell as earnings / valuation jitters took their lead from the US reporting season e.g. Amazon.com (AMZN US) was down -14% on Friday. We’ve been looking for a countertrend bounce from this embattled sector but as we said yesterday “it’s now too early to pre-empt…
The ASX fell today, around 1% to kick off the new week and new month following a bigger fall on Wall Street Friday thanks to weakness in technology/growth. The RBA is set to increase rates tomorrow, the only real argument being by how much, whether they’ll do 15bps or go by 40bps, the former being the consensus view, while tech stocks continued to drag.
