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The last year has been a roller-coaster for bonds, with analysts changing their minds about the path for RBA rate rises/cuts like the weather! The only constant has been RBA Governor Michele Bullock, who has been consistent in her message to the market, i.e. don’t get too optimistic towards rate cuts as inflation remained sticky. That all changed on Tuesday afternoon.
The ASX200 ended the second week of December down by 1.48%, with the tech sector leading the retreat, tumbling by 5.7%. This was accompanied by real estate, financials, and industrials, which all declined by around 2%. The consumer staples and materials sectors were the only pockets to close up for the week, and they both advanced less than 0.1%. On the stock front, we saw some standout performance reversion from trends of 2024:
The index closed lower for the 4th straight session, breaching the 8300 level but finding some support and bouncing 40 points off its lows, the ‘Santa Rally’ now well and truly in reverse with the market having retraced 3 weeks of gains.
The ASX200 opened firmly on Thursday before reversing more than 50 points to finish the session down 0.3%. Strong unemployment data did not help the day, reining in bets for an RBA rate cut in February.
A soft session locally with the kibosh put on a positive open mid-morning as employment data was stronger than expected casting a shadow over the RBA’s new found dovish stance, the market quickly bringing back the probability of a February cut to a coin toss.
We are amending the Active Growth Portfolio Today
The market further embraced Tuesday’s more dovish rhetoric from Michele Bullock on Wednesday as bonds rallied (yields lower) and the Aussie Dollar fell to fresh 2024 lows on the prospect of RBA rate cuts in 2025. Our preferred scenario is unchanged, but the risks have certainly skewed to a more aggressive path by the RBA.
It was all about rate expectations today after the RBA commentary yesterday afternoon, with limited news on the corporate front. Stocks sensitive to a cut crawled higher, and some of the more crowded trades reversed – real estate and consumer discretionary all alone in the green as the other nine sectors fell. The index moved lower from the opening bell and didn’t look like recovering.
The ASX200 slipped -0.36% on Tuesday, but the pronounced stock/sector rotation is what caught our attention. The stimulatory rhetoric out of Beijing on Tuesday saw aggressive buying return to the ASX miners, in a similar fashion to late September.
An interesting session for the ASX today with some aggressive rotation out of the highflyers into the beaten-up miners following news of further Chinese stimulus.
