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Fed Chair Jerome Powell spoke at the Jackson Hole Economic Symposium on Friday night, and said all the right things, reaffirming the markets’ belief that interest rate cuts are just around the corner, but importantly, also highlighted confidence in the economy, which allayed some recent concerns about a potential recession.
Jerome Powell signaled in his speech from Jackson Hole that interest rate cuts lay ahead, although he didn’t provide any details on when or how big the moves would be. The US credit markets are still pricing in 8 rate cuts by this time next year, with the FED Chair’s much-anticipated speech having little impact on expectations for the path of rate cuts into/through 2025. It’s a shame things aren’t as clear-cut for Michele Bullock and the RBA.
The first fall in 11 trading days for the ASX, though it was only marginal on a day that saw far fewer companies report results, and certainly less influential names from an index perspective.
Yesterday, Whitehaven Coal (WHC) announced that Nippon Steel and JFE Steel had bought 30% of their recently acquired Blackwater Met Coal Mine for $US1.1bn, a very useful and well-received cash injection. Interestingly, Japanese giant Nippon Steel said the Queensland government’s coal royalties grab influenced its decision to spend over $US1 billion buying the stake amid rising concerns over supply security, although such concerns haven’t yet been reflected in the coal price, which is trading at 2-year lows. They are understandably concerned that the QLD government’s royalty hike and increasing headwinds around funding will discourage future investments. Politicians and financers are playing an important role in the future evolution of our coal industry, not necessarily a healthy mix
The ASX extended its longest winning streak in almost a decade, notching up its 10th consecutive positive day. There is nothing not to like at the moment, with rate cuts around the corner and earnings season delivering more beats than misses.
Reporting season is keeping MM busy, while the “buy the dip” mentality continues on the index level. Wednesday saw the ASX200 deliver its 9th consecutive positive session, its longest winning streak in almost a decade. The market reversed early losses to be up +0.16%, closing back above the psychological 8,000 level, with further gains likely today. A recovery in the heavyweight miners was the main driving force outside of reporting season, e.g. Mineral Resources (MIN) +5.2%, Fortescue (FMG) +4.1%, and BHP Group (BHP) +1.6%. The iron ore names aren’t out of the woods yet, but the recent news flow has undoubtedly been negative enough to deliver their nadir.
A big turnaround from lunchtime onwards saw a ~40pt decline in the market early turn into a modest gain, underpinned at the index level at least, by a resurgence from resources, while strong results from Wisetech (WTC) had a significant influence on the IT sector’s performance.
Equities took a rest overnight following their stellar recovery; the UK FTSE -1% was the underperformer in Europe compared to the EURO STOXX 50 -0.3%. The US S&P500 slipped just -0.2%, snapping its 8-day winning streak in a very quiet fashion. A period of consolidation into Friday’s Jackson Hole Economic Symposium is likely as the market waits on Jerome Powell’s speech, which is likely to provide a deep insight into the Fed’s current outlook for interest rates. A cut in September is almost a certainty, though comments about future cuts is what will drive markets.
The ASX chalked up its longest winning streak since January with an eighth day of gains today underpinned by technology shares, though it was a rare day where resources chimed in with a positive move offsetting some profit taking in the banks.
We are tweaking the Active Growth Portfolio today
