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Global stocks continue to encounter headwinds from a number of different areas and last week inflation was the standout raising its head across a number of countries, yet most indices continued to rally and are still hovering around their respective all-time highs. Also we’re approaching the seasonally very strong period for stocks which adds to any optimism. At this stage the liquidity driven stock market rally continues to win arm wrestles against all challengers!
The AX200 continues to grind towards all-time highs even in the face of ongoing adverse news, last week it was soaring bond yields and a pullback in commodities but as has been the case throughout 2021 when one sector struggles another one steps up to more than compensate e.g. last week saw the financials and real estate sectors offset losses by the resources stocks. This has been the basic narrative during the steady advance of 2021 implying if the selling vanishes as is so typical into Christmas hold onto your hats!
The market limped into the weekend with a distinct lack of conviction, Energy and Materials were weak today, Energy was actually down ~4% on the week after a strong period of outperformance however as China ratchets up the rhetoric around high prices, some have been shaken out of a trade that MM believes has further legs.
The ASX200 continues to struggle to advance much above 7400 as it pays respect to the historical statistics in play i.e. the bulls may have to wait until the Melbourne Cup runners are off and running before we can see a sustained challenge on 7500, and above. Yesterday saw the index drift from its lunchtime highs in sympathy with US futures, the COVID re-opening names experienced further profit taking while the Real Estate Sector was the standout top performer.
A lot going on from a corporate perspective today with a bunch of AGM’s & trading updates which seemed to attract most off the attention. Property stocks best on ground while Energy fell again, however at the index level it was very quiet indeed. From a seasonal perspective, the end of October, November and the start of December are generally flat at best before the Christmas rally kicks into gear towards the end of December. While there’s no guarantee that will play out, we do take seasonal influences into account.
The ASX200 rallied over 0.5% yesterday although it was up over 1% moving into lunch before we saw some weakness creep into the Resources & Energy Sectors. However it was still a solid session for the local index which enjoyed over 65% of stocks on the main board advance with a few noticeably accelerating north i.e. 6 stocks rallied by over 5% while only 1 culprit retreated by the same degree.
The ASX rallied today although it did finish ~35pts below the morning high and there was a big market on close (MOC) order that sent the index ~15 points lower in the match, still the market continues to climb the wall of worry no doubt frustrating the bears in the process. IT stocks led the line again today up more than 1% while Energy stocks fell by a similar margin.
The ASX200 surrendered early gains on Tuesday to end the day marginally lower as some of the large miners weighed on the index e.g. BHP Group (BHP) -2% and RIO Tinto (RIO) -3.25%. The RBA released its “minutes” at 11.30am on Tuesday, the unveiling of Philip Lowe & Co’s thoughts at their most recent policy meeting 2-weeks ago took some of the puff out of the hawks sails, at least for a few days, which in the process led to some selling in the banks and resources i.e. the largest sectors in the ASX:
The ASX knocked it’s head at the 7400 resistance level today as weakness amongst the materials was offset by strength in the IT space, overall, a day that saw no real net gain/loss at the index level but again there was plenty happening under the hood as the RBA once again poured cold water on rate hikes.
The ASX200 edged higher yesterday even as more stocks retreated under the weight of rising bond yields and nervous US futures – more on the former later. The local market experienced pronounced sector rotation throughout the day as bond markets heavily influenced investors, I have seen a few overnight moves akin to this in 2021 but arguably none as dramatic intra-day:
