China has been a major buyer of gold as investors searched for an alternative to a plummeting property and stock market and a hedge against the Yuan. However, the last week has mitigated many of the fears weighing on Chinese investors over recent times.
Last week, Beijing pressed the “whatever it takes button” to jumpstart their struggling economy that’s currently on course to miss its annual GDP growth target of ~5%. Financial markets across the world stood back and took notice, with the Shanghai Composite surging to a three-month high
The ASX200 surged +0.95% on Thursday, with broad-based buying propelling the local index back above the psychological 8200 level. Over 85% of stocks in the major index advanced, while 10 of the 11 sectors finished in the green, with the banks again the main drag from a points perspective.
The ASX200 slipped -0.2% on Wednesday while extending its recent stock/sector reversion. Commonwealth Bank (CBA) declined by -2.3% while BHP Group (BHP) added another +3.8%, one more similar day, and BHP will reclaim the top spot as ASX200’s largest company. The rotation back in miners following China's mammoth stimulus saw iron ore rally back towards $US100/MT; remember, analysts are valuing the likes of BHP and RIO, with the bulk commodity closer to $US80/MT.
On Tuesday, the ASX200 delivered a perfect example of how investing is far more about stock/sector performance than the underlying index, which attracts too much attention. So far, 2024 has been dominated by interest rate-sensitive stocks, with the Tech, Financials and Real Estate sectors all up over +20%. Conversely, the materials and energy names were down over 15% before yesterday’s dramatic reversion – one day doesn’t make a summer, but it did catch our attention
The BofA’s September Fund Manager Survey (FMS) revealed a “big shift” from global cyclicals to bond sensitives. September saw a rotation into defensive sectors and out of cyclical sectors. Fund managers’ relative net overweight stance towards defensives (utilities and staples) versus cyclicals (energy, materials and industrials) is now the highest since May 2020. If/when China does regain investors' confidence, the unwind is likely to be dramatic.
Freight costs are already in a recession, and truckers who bought their rigs back in 2022, when shipping rates were high, are struggling to get enough work to pay for them today after prices plunged. Over the last 20 years, it is not a good sign for manufacturing jobs to have trucking rates falling. We may have solid GDP in the U.S., but every other time, the Cass Linehaul Index rate of change has gone negative; it has brought falling GDP at some point as part of the cycle. Hence, it would be unusual for the U.S. to escape a technical, economic recession this time, with trucking already in one.
The US energy sector advanced +1.3% on Thursday night, suggesting local names will enjoy a solid end to the week. Crude has struggled through 2024 on global growth concerns, and while China has been front and centre of the market pessimism, the US and Europe haven’t helped. However, recent monetary policy easing by the Fed and ECB has illustrated that Western central banks are focused on engineering a soft economic landing. Brent crude has potentially already experienced the “washout” under $US70, which MM has been anticipating, and a move back towards $US80 would catch many traders on the wrong foot.
This morning, AEST, the Fed cut interest rates by an outsized 0.5%, leading to an initial 375-point surge by the Dow, which subsequently reversed, leaving the old index down over 100 points. Traders initially embraced the large rate cut, though it did raise concerns that the Fed was trying to get ahead of potential economic weakness. We should remember that credit markets were already pricing a 65% chance of such an aggressive move. Comments from the Fed focused on inflation first and foremost, but they are conscious of a slowing economy:
• “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,”
The Fed are comfortable that inflation is under control, and in the ensuing press conference, Jerome Powell was balanced around the economy: “I don’t see anything in the economy right now that suggests that the likelihood ... of a downturn is elevated,” said Powell. However, stocks faltered as they got their anticipated sugar hit, but latched onto commentary that implied we shouldn’t get used to this size of cut.
The Active Growth Portfolio advanced 2.9% last week, including dividends, outperforming the ASX200, which gained 2.3%. We enjoyed solid gains by Mineral Resources (MIN) +24.9%, Evolution Mining (EVN) +14%, South32 (S32) +8%, Magellan (MFG) +7.6% and BHP Group (BHP) +6.4% while Worley (WOR) -2.3%, Treasury Wines (TWE) -2%, and CSL Ltd (CSL) -1.8% reined in the outperformance.
Last week, Beijing pressed the “whatever it takes button” to jumpstart their struggling economy that’s currently on course to miss its annual GDP growth target of ~5%. Financial markets across the world stood back and took notice, with the Shanghai Composite surging to a three-month high
The ASX200 surged +0.95% on Thursday, with broad-based buying propelling the local index back above the psychological 8200 level. Over 85% of stocks in the major index advanced, while 10 of the 11 sectors finished in the green, with the banks again the main drag from a points perspective.
The ASX200 slipped -0.2% on Wednesday while extending its recent stock/sector reversion. Commonwealth Bank (CBA) declined by -2.3% while BHP Group (BHP) added another +3.8%, one more similar day, and BHP will reclaim the top spot as ASX200’s largest company. The rotation back in miners following China's mammoth stimulus saw iron ore rally back towards $US100/MT; remember, analysts are valuing the likes of BHP and RIO, with the bulk commodity closer to $US80/MT.
On Tuesday, the ASX200 delivered a perfect example of how investing is far more about stock/sector performance than the underlying index, which attracts too much attention. So far, 2024 has been dominated by interest rate-sensitive stocks, with the Tech, Financials and Real Estate sectors all up over +20%. Conversely, the materials and energy names were down over 15% before yesterday’s dramatic reversion – one day doesn’t make a summer, but it did catch our attention
The BofA’s September Fund Manager Survey (FMS) revealed a “big shift” from global cyclicals to bond sensitives. September saw a rotation into defensive sectors and out of cyclical sectors. Fund managers’ relative net overweight stance towards defensives (utilities and staples) versus cyclicals (energy, materials and industrials) is now the highest since May 2020. If/when China does regain investors' confidence, the unwind is likely to be dramatic.
Freight costs are already in a recession, and truckers who bought their rigs back in 2022, when shipping rates were high, are struggling to get enough work to pay for them today after prices plunged. Over the last 20 years, it is not a good sign for manufacturing jobs to have trucking rates falling. We may have solid GDP in the U.S., but every other time, the Cass Linehaul Index rate of change has gone negative; it has brought falling GDP at some point as part of the cycle. Hence, it would be unusual for the U.S. to escape a technical, economic recession this time, with trucking already in one.
The US energy sector advanced +1.3% on Thursday night, suggesting local names will enjoy a solid end to the week. Crude has struggled through 2024 on global growth concerns, and while China has been front and centre of the market pessimism, the US and Europe haven’t helped. However, recent monetary policy easing by the Fed and ECB has illustrated that Western central banks are focused on engineering a soft economic landing. Brent crude has potentially already experienced the “washout” under $US70, which MM has been anticipating, and a move back towards $US80 would catch many traders on the wrong foot.
This morning, AEST, the Fed cut interest rates by an outsized 0.5%, leading to an initial 375-point surge by the Dow, which subsequently reversed, leaving the old index down over 100 points. Traders initially embraced the large rate cut, though it did raise concerns that the Fed was trying to get ahead of potential economic weakness. We should remember that credit markets were already pricing a 65% chance of such an aggressive move. Comments from the Fed focused on inflation first and foremost, but they are conscious of a slowing economy:
• “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,”
The Fed are comfortable that inflation is under control, and in the ensuing press conference, Jerome Powell was balanced around the economy: “I don’t see anything in the economy right now that suggests that the likelihood ... of a downturn is elevated,” said Powell. However, stocks faltered as they got their anticipated sugar hit, but latched onto commentary that implied we shouldn’t get used to this size of cut.
The Active Growth Portfolio advanced 2.9% last week, including dividends, outperforming the ASX200, which gained 2.3%. We enjoyed solid gains by Mineral Resources (MIN) +24.9%, Evolution Mining (EVN) +14%, South32 (S32) +8%, Magellan (MFG) +7.6% and BHP Group (BHP) +6.4% while Worley (WOR) -2.3%, Treasury Wines (TWE) -2%, and CSL Ltd (CSL) -1.8% reined in the outperformance.
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