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The ASX200 ended Thursday down -0.8% on broad-based selling, only 20% of the index managed to close in positive territory with the gains focused on the energy names plus a relatively small bounce by the battery metals stocks that were hammered on Wednesday. With the exception of the Utilities Sector, there was nowhere to hide although the decline felt more like a lack of interest by the buyers as opposed to aggressive selling e.g. only 4% of the index fell by more than 5% whereas on Wednesday we had the same number of stocks plunge by over 10%. The tech stocks were again the weakest link falling over 2% following strong US economic data reigniting fear of more aggressive rate hikes over the coming 12-18 months.
Aussie shares struggled from the get-go today and never really staged any meaningful recovery as traders went risk-off. Concerns around the rate of tightening in the US drove the weakness while Australia could see another rate hike on Tuesday, of up to 40bps according to ANZ’s economist. The concerns meant the high growth Tech sector was the hardest hit, but despite the broad weakness, two sectors finished more than 1% higher.
The ASX200 experienced a choppy Wednesday but some healthy buying into the close finally saw the index enjoy a gain of +0.3%. Stock & sector rotation was yet again the main game in town with 10% of the main board falling by over -5% while 7 names were hammered by more than -10%, however the influential banks recovered some of their recent losses which when combined with advances by the major iron ore producers was enough to take the index higher even with less than 40% of stocks rallying. This time the underlying theme was clearly “risk-off” with a couple of specific sectors receiving close attention from the sellers:
The local bourse was choppy in a tight range today, setting a high for the day early and falling 34pts by 1pm before a helpful 17pt jump in the close meant it finished back near the early highs. The more defensive sectors were the outperformers today as the Telcos and Financials carried the index. Utilities were smacked on more stock-specific news and tech gave back some of its recent gains. The Small-Cap index struggled as well with money moving into the ‘safer’ havens today, it underperformed the ASX200 by 2%.
The ASX200 was sold off over 1% yesterday in classic “two steps forward – one step back” fashion i.e. after basically rallying from 7100 to 7300 in just 2-days we’re back at 7200, the middle of the last 12-months trading range. The banks weighed on the index on Tuesday with the “Big Four” falling an average of 2% while the Tech Sector was back under pressure falling -1.9% however losses were fairly broad-based with 65% of the main board declining as “risk off” seems to follow “risk on” as fast as night follows day!
A disappointing day overall as the local market gave back much of yesterday’s strong rally. Things won’t move in straight lines, and today was certainly proof of that with ~75% of yesterday’s gains on the broader market handed back. Tech was hit by rising bond yields, the Aussie 10-years rallied 10bps after tracking lower over recent weeks. Hefty selling on the futures market weighed as well as it seemed a little lost with the US market closed overnight. All sectors closed in the red today and the influential financials sector was the hardest hit.
The ASX200 rallied strongly on Monday delivering an emphatic “risk on” session which saw 85% of stocks advance while only the Utilities Sector closed down on the day, the message from investors was loud and clear – “Goodbye & good riddance to April + May!” As we’ve discussed through recent reports bond yields feel like they’ve topped out for now hence under the hood sector rotation is underway as portfolios that are largely positioned for surging inflation have their hawkish skew at least tempered. We believe yesterday’s relative performance moves across the market groups / sectors will largely follow through, at least short-term:
The local market ripped through the 7200 resistance today in a positive start to the week that saw Tech continue its positive momentum. Yields have taken a breather and that has allowed growth names to find their feet again. Materials were also well bid on positive commodity prices though the energy sector was left behind despite another positive move from oil markets today. Utilities underperformed the broader index and was the only sector to closer down on the day.
Over recent weeks MM have repeatedly remarked about how bearish investors both feel and are positioned with a number of measures sitting at decade extremes, not a scenario that usually lasts particularly long before we experience a squeeze of the complacent crowded position. After 7 consecutive weeks of falls, the S&P500 rallied +6.6% last week with sellers appearing to exhaust themselves as we saw hints of some Fed flexibility over the coming months. The data in our opinion while mixed definitely challenged many analysts’ views that we are on an inevitable path of higher rates followed by a subsequent recession. MM saw a few pockets of clear optimism last week:
While it certainly didn’t feel like it at times the ASX200 has managed to advance for 2 consecutive weeks aided by strong moves by the banks and resources, arguably the backbone of the Australian market. The index may be sitting ~6% below its late 2021 all-time high but the performance from a number of the market heavyweights is far more impressive:
