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The ASX200 trod water on Monday, although there were ongoing clear signs of “buying into weakness” with the main index reversing losses to extend its recent recovery – the Australian market is only 2% below its all-time high, having quickly dismissed the recent market jitters courtesy of the Yen Carry Trade unwind and a potential US recession. As we often trot out at MM, the market doesn’t go down without the banks. Following Westpac’s solid Q3 update, we saw CBA again post fresh all-time highs and WBC fresh post-COVID highs with the “Big Four” up an average of +1.25% – the Banking Sector looks good, which by definition suggests the ASX200 will be testing its all-time high over the coming weeks.
A mildly positive session to start the week, though the gains at the index level were all down to the banks following a positive quarterly update from Westpac, which offset weakness elsewhere; ~55% of the main board ended lower despite a positive session overall.
The index ended last week on the front foot, an impressive +4.5% above the month’s low, although we haven’t embraced the bounce as enthusiastically as the US, where the S&P500 is now only 2% below its all-time high—what a difference a week makes! At this stage, markets are more comfortable that rate cuts may be delayed than a recession is in the offing. So far this month, the ASX200 is down only -1.5 %, with the Energy & Materials stocks continuing to weigh on the ASX. However, outside of China issues, valuations remain stretched, likely leading to elevated volatility whenever the sentiment vaguely sours.
Most major overseas indices finished the week in a positive fashion. In Europe, the EURO STOXX 50 advanced +0.7%, although the UK FTSE did slip -0.43%. in the US. The S&P500 rose on Friday as investors advanced +0.2% to finish the best week of 2024 by adding to the recovery from the markets’ violent rout at the start of August. Following this week’s comeback, the S&P 500 is now just 2% away from its mid-July record high. Earnings continue to show strength as the latest reports trickle in, and around 93% of S&P500 companies had posted results as of Friday afternoon, according to FactSet. Of those, more than 78% have surpassed Wall Street’s expectations
It was a very strong end to the week, with the local market spending most of the session showing triple-digit gains before ending the day 105 points, or +1.3%. The impressive session in the US, following strong economic data, provided the initial bullish catalyst for the ASX, and selling was noticeably absent throughout the day as broad-based buying saw almost 85% of the index close higher.
A slight format change this Friday as reporting season dominates the market after the BOJ’s rate hike and recession fears become a distant memory. This morning, we looked at some of Thursday’s worst-performing stocks in the ASX200, plus one other that surged to fresh post-COVID highs. As expected for this time of year, reported season dominated the moves. Interestingly, four of the stocks had enjoyed a stellar few years, while the fifth had been a distinct underperformer. Still, it doesn’t matter if you disappoint a fickle market with bad earnings and/or our forward guidance; you will be dealt with accordingly.
It was a reasonable day for the ASX, which rewarded investors with five consecutive positive sessions; the mood was buoyed by relative calm in Asia. The Nikkei in Japan was up 0.8% while US Futures also improved during our time zone to be ~0.2% higher around our close. Buying was tentative, with only 63% of the main board closing higher, led by the companies which have reported well over the last 48-hours, conversely, the losers enclosure was dominated by stocks that disappointed investors today, e.g. Nufarm (NUF) -9.8% and Origin (ORG) -9.4%.
Yesterday saw Iron Ore plunge to its lowest level since May 2023 as China Baowu Steel Group Corp, the world’s largest steelmaker, warned of a crisis ahead in China, increasing concerns about demand just as major miners boost output. Futures of the bulk commodity subsequently dropped in Singapore for the sixth time in seven days. Hu Wangming, chairman of China Baowu Steel Group Corp., said the sector now faced a crisis more painful than the downturns of 2008 and 2015, likening conditions to a “severe winter” and highlighting a need to preserve cash. Iron ore has plunged by almost a third this year in a slump that’s made it one of the worst-performing major commodities and, by definition, sectors in the stock market.
Another positive session for the ASX as we continue to gradually recover from last week’s aggressive sell-off, though, the best of it was seen early and the index finished ~60 points below the morning highs, which isn’t a great look having hit resistance at the mid-point of the trading range – see chart below. The Iron Ore miners were the catalyst with weakness in Iron Ore Futures coming out of Singapore, while ANZ and NAB saw reasonable selling after the market digested the quality of CBA’s result, and what it meant for peers – NAB out tomorrow with a trading update.
Yesterday saw strength return to the banking sector with ANZ and CBA leading gains, though the broad sector was up an average of 1%. That was offset by weakness in Healthcare and a muted session for the miners, keeping the index in a tight range to start the week. We’re starting to see a more eclectic mix of performers, while some of the recent winners are buckling under high expectations.
Stocks that have been under earnings pressure are starting to show signs of life. Packaging company Orora (ORA) rallied 19% on an informal takeover approach that could prompt other bidders from the sidelines, with ORA bringing forward their results announcement and strategy update to today. Metal recycler Sims Group (SGM) announced further rationalisation of their business, selling non-core assets – the market likes that pushing shares 10% higher, while Challenger Group (CGF) provided a strong outlook for annuity sales in FY25.
