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Commodities helped support the local index into the weekend as the index recouped most of the losses see this week. Materials were strong coming on the back of further sanctions on Russia as well as commentary out of Japan as they look for alternative sources of coal and other bulk commodities. Tech remained under pressure with central banks continuing to push higher rates and balance sheet tightening, also weighing on Real Estate stocks.
The local market endured a bad day at the office yesterday falling -0.6% as we followed the US futures lower through both their day session and again during our day time / their overnight session. Over 70% of the mainboards stocks slid on Thursday but it was again the growth stocks that weighed the most on the ASX with all members closing lower leaving the overall sector down -3.5%, ultimately it was a fairly uninspiring day that saw the SPI Futures close where they were trading at 10am.
The market opened lower this morning & tracked sideways in a lacklustre session with weakness across the IT stocks the only real standout, while there was an obvious move into the more defensive areas of Staples, Utilities & REITS. The fact todays -47pt drop was the biggest in 3 weeks highlights how subdued the market has become at the index level, with all the action happening under the hood.
The local market fought valiantly on Wednesday to recover from a very shaky start finally closing down exactly -0.5%, although only 31% of the market closed up on the day a strong session across the influential Banking Sector was enough to offset the broad based losses across the tech and resources stocks. The sentiment towards the banks appears to have lifted following yesterday’s RBA comments which strongly implied they would start hiking interest rates sooner rather than later, historically banks improve their margins in a higher rate environment, assuming bad debts remain stable. Our view towards the sector hasn’t changed for months and if MM is correct things should start to get interesting:
The market was hit on open to trade down ~80pts however it ground back from 11am onwards to re-coup half of those declines, most support coming from the influential banking sector which had a strong day.
The S&P/ASX 200 fell -37points / -0.37% to close at 7527.
Financials (+3.10%) & Consumer Staples (+2.22%) lead the line today, while IT (-2.88%) & Materials (-1.52) struggled.
Tech stocks keyed off underperformance in the US overnight, the almost daily rotation continues however they are gaining more support overall as the pace of appreciation in bond yields slows.
Yesterday saw the ASX200 surrender most of the days early gains following the RBA’s interest rate decision and accompanying rhetoric but it still managed to eke out a +0.2% gain as the local index inches ever closer to an all-time high, now only 1.3% away. The Tech Sector followed their US peers higher on Tuesday ending the day up +3.15% with every stock in the main board’s sector closing up on the day – MM is still looking for the growth names to outperform over the coming weeks/months but rotation keeps threatening and failing to follow through.
The market was storming higher this morning to hit a 7573 peak before the RBA implied they had lost patience and would move sooner on rate hikes, another credibility losing exercise from the central bank following their poorly executed attempt at yield curve control. The AUD spiked up through 76c, the first time it’s been there since June 21 and the market sold off, down ~40 odd points from its early peak to close only marginally higher.
We’ve started off the first full week of April with a small +0.3% advance courtesy of broad-based gains offsetting a tired looking Banking Sector although the miners and utilities stocks continued to shine as they have through most of 2022 – if the market remains in sync with our roadmap for the year we see no reason to anticipate a significant change in relative sector performance until we do find an inflection point. This ties in with our recent stance towards the local miners:
A fairly flat session to start the week with little direction at the index level although there were some decent moves under the hood. The fund managers were in focus following a takeover approach while the Utilities, Materials & IT stocks all finished up around 1%.
The ASX200 has commenced a historically strong few weeks less than 2% below its all-time high with a feeling of inevitability in the air – MM has been targeting the 7700-7800 area for months and at this stage, we feel on point. However, there is usually a sting in this tail for equities because both locally and overseas May / June are usually the worst seasonal combined months for stocks e.g. the Average return for the ASX200 over the last 20-year during these 2-months is -1.0% and we should remember that during most of this time stocks have been enjoying a strong bull market hence the regularly quoted phrase “sell in May & go away”.
