HomeReportsThe Match Out: Resources weigh on the index, Small-caps…
The market opened well this morning, up more than ~50pts at our high, however once again US Futures traded lower throughout our time zone and Aussie stocks followed suit, closing only marginally higher. It was the resources weighing significantly with most sectors finishing in the green despite the weaker index. Some of the more unloved parts of the market over the last quarter caught a bid today with Real Estate popping 1.45% just one example.
A positive session to kick off the new trading week, one where reporting really starts to ramp up. Property & Consumer Discretionary stocks the driving force today, clearly the outcomes being achieved here are better than feared and stocks are rallying from a low base, while Energy & Financials underperformed.
Last week saw some inconsistencies / fascinating moves across financial markets which we believe were largely driven by investor positioning & sentiment but this might not continue if MM’s preferred scenario unfolds for bond yields. Last week was all about the US CPI and Wednesday’s number showed a much-welcomed slowdown in inflation which sent most indices soaring to their highest levels in over 3-months:
The ASX200 struggled last week considering the theoretically strong tailwind from a weak US CPI print and no major blow-ups from the local reporting season, the index did manage to scale fresh 9-week highs but by Fridays close it had only managed to close up +0.2%. The Resources Sector helped keep the index in positive territory, significantly assisted by BHP’s bid for OZ Minerals (OZL), but what probably caught most investors off-guard was a more than 2% pullback by the tech & healthcare sectors even after the deceleration by the main US inflation indicator.
A softer session to end a positive week for the ASX with the first full week of local reporting proving to be okay. Energy rallied back today, so too did the Telco’s while Property lost some of yesterday’s lustre.
The ASX opened with a bang this morning rallying off the back of a strong session in the US following signs that inflation has peaked, CPI printing 8.5% versus 8.7% expected. This is a big deal, uncontained inflation is the reason why rates have risen so aggressively and why risk assets had been sold off. Stabilisation here provides more certainty and more certainty gives confidence, and we all know the market ebbs and flows in the short term on this metric.
The ASX200 struggled on Wednesday with many traders taking a back seat ahead of last night’s important US CPI (inflation) data, the index ultimately closed down -0.5% basically at the same level we started August. Selling was broad-based with 70% of the main index closing in the red but with the influential Banking Sector closing higher, even as Commonwealth Bank (CBA) slipped -0.3%, losses were limited i.e. for fireworks to be lit under the index we generally need to see the Resources & Banks run in one direction.
The ASX weakened today ahead of the all-important inflation print in the US tonight with consensus tipping a result of +8.7% YoY. Tech fell on concerns bond yields will rally again while the Utilities which are more defensive + some are linked to CPI fared well.
On Friday we saw an extremely strong set of US Employment numbers increase expectations of a 75bp hike at the September FOMC meeting but tonight’s CPI and the plethora of Fed speakers enjoying the limelight in coming weeks are likely to see opinions swing between 75bp, and back towards 50bp. The markets have taken a definite shift towards a more hawkish stance since Friday and another strong CPI print could easily see US 10 years back above 3% which will pressure equities and especially the Tech Sector.