The ASX200 fought hard to overcome early weakness to close marginally higher on Monday although the gains were very stock / sector specific with under 40% of the main board managing to close in positive territory. Obviously the big news to kick off the week was BHP’s $8.3bn bid for “green metals” miner OZ Minerals (OZL) – more on this later, but the aggressive play by the “Big Australian” also added a tailwind to reverse some of the recent sector performance following the extremely strong US Jobs Report on Friday night which sent bond yields sharply higher:
This year we’ve seen stock market sectors dance to the inflation/interest rate tune whereas the underlying index has been a far harder tougher nut to fathom:
The ASX200 reversed early gains on Thursday to close marginally in the red as weakness in the influential Resources Sector more than offset ongoing strength from both the tech and banking stocks. The last few years have seen major stock & sector rotation within the ASX depending on the macro events in focus at the time, since mid-June its been all about bond yields correcting as central banks ease off their hawkish rhetoric while the risk of a recession in 2023 has been increasingly factored into the market, the moves over the last 7-weeks tells a clear tale:
The ASX200 slipped -0.3% yesterday with the banks weighing on the index while the less influential tech space rallied another +2.4%, the winners & losers were evenly matched on a day when bond yields continued to dictate terms under the market’s hood:
As I’m sure everybody knows by now that on Tuesday the RBA hiked local interest rates by 0.5% for the 3rd consecutive month, taking the Official Cash Rate to 1.85%. However there was a noticeable change in their rhetoric with Philip Lowe stating that the path ahead “is a narrow one clouded in uncertainty” and “that the board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it’s not on a pre-set path” – overall it sounded like he was echoing recent comments from the Fed as central banks clearly start...
The ASX200 rallied another +0.7% on Monday taking the index within a whisker of the psychological 7000 level although it was interesting to see the defensive stocks dominating the winner’s enclosure as opposed to the high beta growth names i.e. Utilities +2%, Healthcare +1.6% and Telcos +1.4% whereas the Consumer Discretionary -0.2% & Tech Sectors -0.4% slipped marginally lower. However at this stage MM is not reading anything into this minor sector rotation, it simply felt like some book squaring ahead of the RBA’s much-anticipated rate hike at 2.30 pm this afternoon:
The Fed raised interest rates another 0.75% last week but just a few words were enough to change the crowd’s hawkish mindset which not surprisingly sent major ripples through financial markets i.e. bond yields slipped, equities rallied and the $US fell which helped kick start the commodities back into gear:
US tech stocks surged over 4% on Wednesday night following the almost dovish comments from Jerome Powell after the Fed hiked rates by 0.75% taking the US official interest rates to their highest level since mid-2019. The moves on the sector level in the US made sense after the Fed chair eased investors’ fears that the Fed was set on an unwavering path of aggressive rate hikes i.e. although US 2-year bond yields remain around 3% they look & feel unlikely to surge above the 3.5% area which was being tested in mid-June. Hence rate sensitive stocks largely outperformed on Wednesday in the US:
The ASX200 rallied yesterday following the Australian CPI data which showed inflation had jumped to 6.1%, although this was still a fresh 20-year high it was encouragingly below the consensus 6.3% expected by the market – as we wrote on Wednesday “bond traders have been a touch too hawkish since May”. However on every level where we looked prices were higher with the only question being how much!
Equities have slipped into a holding pattern ahead of today’s Australian inflation data and the FOMC’s decision on US interest rates which will be delivered when most of us will be sound asleep tonight. The high likelihood is volatility will kick in after both releases but we are becoming increasingly mindful that over the last few months markets have been pricing in the worst-case scenario for both inflation & bond yields, especially in some pockets of the share market.
This year we’ve seen stock market sectors dance to the inflation/interest rate tune whereas the underlying index has been a far harder tougher nut to fathom:
The ASX200 reversed early gains on Thursday to close marginally in the red as weakness in the influential Resources Sector more than offset ongoing strength from both the tech and banking stocks. The last few years have seen major stock & sector rotation within the ASX depending on the macro events in focus at the time, since mid-June its been all about bond yields correcting as central banks ease off their hawkish rhetoric while the risk of a recession in 2023 has been increasingly factored into the market, the moves over the last 7-weeks tells a clear tale:
The ASX200 slipped -0.3% yesterday with the banks weighing on the index while the less influential tech space rallied another +2.4%, the winners & losers were evenly matched on a day when bond yields continued to dictate terms under the market’s hood:
As I’m sure everybody knows by now that on Tuesday the RBA hiked local interest rates by 0.5% for the 3rd consecutive month, taking the Official Cash Rate to 1.85%. However there was a noticeable change in their rhetoric with Philip Lowe stating that the path ahead “is a narrow one clouded in uncertainty” and “that the board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it’s not on a pre-set path” – overall it sounded like he was echoing recent comments from the Fed as central banks clearly start...
The ASX200 rallied another +0.7% on Monday taking the index within a whisker of the psychological 7000 level although it was interesting to see the defensive stocks dominating the winner’s enclosure as opposed to the high beta growth names i.e. Utilities +2%, Healthcare +1.6% and Telcos +1.4% whereas the Consumer Discretionary -0.2% & Tech Sectors -0.4% slipped marginally lower. However at this stage MM is not reading anything into this minor sector rotation, it simply felt like some book squaring ahead of the RBA’s much-anticipated rate hike at 2.30 pm this afternoon:
The Fed raised interest rates another 0.75% last week but just a few words were enough to change the crowd’s hawkish mindset which not surprisingly sent major ripples through financial markets i.e. bond yields slipped, equities rallied and the $US fell which helped kick start the commodities back into gear:
US tech stocks surged over 4% on Wednesday night following the almost dovish comments from Jerome Powell after the Fed hiked rates by 0.75% taking the US official interest rates to their highest level since mid-2019. The moves on the sector level in the US made sense after the Fed chair eased investors’ fears that the Fed was set on an unwavering path of aggressive rate hikes i.e. although US 2-year bond yields remain around 3% they look & feel unlikely to surge above the 3.5% area which was being tested in mid-June. Hence rate sensitive stocks largely outperformed on Wednesday in the US:
The ASX200 rallied yesterday following the Australian CPI data which showed inflation had jumped to 6.1%, although this was still a fresh 20-year high it was encouragingly below the consensus 6.3% expected by the market – as we wrote on Wednesday “bond traders have been a touch too hawkish since May”. However on every level where we looked prices were higher with the only question being how much!
Equities have slipped into a holding pattern ahead of today’s Australian inflation data and the FOMC’s decision on US interest rates which will be delivered when most of us will be sound asleep tonight. The high likelihood is volatility will kick in after both releases but we are becoming increasingly mindful that over the last few months markets have been pricing in the worst-case scenario for both inflation & bond yields, especially in some pockets of the share market.
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