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The Match Out: ASX flat, Inflation higher again – bond yields rally, A2 Milk (A2M) downplays growth,
A lot happening on the corporate front today as AGMs and trading updates dominated news flow, while we also saw higher than expected local inflation data push bond yields higher and knock equities lower, although stocks staged a recovery in the afternoon.
The ASX200 again tried to push higher early on Tuesday only to drift through the afternoon, this style of price action might often concern us but the local market just feels a little stretched this month, we still anticipate fresh highs into November / Christmas. All the action on Tuesday was on the stock / sector level as lithium stocks rallied while gold stocks gave back some of their recent gains but overall it was a quiet day as we see slowly & quietly say goodbye to October.
The ASX opened higher this morning however the best of it was seen early and the market tracked lower throughout the day. Positive trends in the tech pace overnight flowed through into our market today with the tech stocks +1.34% while the utilities sector was the biggest drag. Overall, a weak session and the market does look tired in the short term as we approach the end of October.
The ASX200 kicked off the last week of October in solid form rallying to new monthly highs in the morning before finally managing to close up 0.3% even as more stocks actually closed in negative territory. The resources names, led by the energy component, were the best on ground while the tech sector slipped lower but overall it was another quiet session as investors appear reticent to buy into strength, they must have read our notes!
A choppy but positive session overall to kick off the trading week with the Energy sector returning to the winners circle and rallying 2.6% while the IT sector was the biggest detractor.
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.
