HomeReportsWhat Matters Today: Is it time for flight or fight…
Beijing has undoubtedly got its work cut out, July’s CPI fell by -0.3% year on year while the PPI fell -4.4% over the same period, the 1st time both numbers have been negative since November 2020 when COVID was the only story in town hence the deflation concerns are real and well-founded and MM firmly believes Xi Jinping et al must step up. However, it’s not all bad news with Chinese household savings continuing to rise illustrating that a significant part of the issue is consumer confidence which can be reversed with the appropriate action.
181 stocks in the ASX 200 made gains today, all sectors were higher, intra-day dips were bought, and the market made a new all-time closing high up tripped digits – a bullish day all around as we move into local reporting season. US earnings have strong; we made the point this morning that S&P 500 companies are on track to post a +9.1% lift in profits, far above analysts’ projection of 2.8% before results began, with earnings, and importantly, positive earnings revisions ultimately driving stock prices. Now it’s our turn!
The ASX200 recovered from early losses on Monday to end the session in positive territory, an impressive performance considering the Dow's more than 500-point drop on Friday night.
The ASX opened on the backfoot this morning, however that was the worst of it, with strength amongst the miners and supermarkets offsetting weakness elsewhere. US Futures edged higher, and Asia was also well supported during our time zone, moving past the weakness we saw in US economic data on Friday.
Since Trump unleashed chaos on global equities in April with his tariff bombshell, their recovery has been nothing short of remarkable. In just three months, the ASX200 and US S&P 500 have surged by +22% and +33% respectively. At MM, we’ve held a bullish stance through the recovery, but our confidence is now waning. The cornerstone of the stunning recovery has often been referred to as the “Goldilocks Scenario”.
The ASX200 slipped 0.1% last week after a tough Friday session, but it still ended up 2.3% for July. Earnings season is upon us, and it's already started to exert its force on the market - It's not often you see an ASX200 stock halve in the blink of an eye! We have begun the seasonally weak August-September period for the ASX, and on cue, the index has started to feel a touch soft, although 2-days doesn't make a summer.
Tariffs were back impacting the ASX today after the Whitehouse said that it will maintain a minimum global levy of 10%, while imports from countries with a trade surplus with the US will face at least 15%.
The ASX 200 ended the Thursday session down just 0.2%, recovering ~80% of its early decline, with winners and losers evenly matched. July lived up to its seasonal reputation, closing up +2.4%. If not for a -2.6% clobbering of the influential Materials Sector yesterday, we could easily have been trading at new highs.
The ASX started the day on the backfoot with the materials space copping a beating after the ~20% selloff in US copper overnight as the index fell -55pts early, but the ~8700 level held well.
The ASX200 surged +0.6% on Wednesday, closing within 0.2% of its all-time trading high after the soft inflation print ignited the rate-sensitive stocks/sectors. Real estate, consumer discretionary, and the financials all closed up more than 1%.
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