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.
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.
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.
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.
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.
The ASX200 recovered a further +0.5% on Monday, although it wasn’t an overly impressive day for the Australian market. The local index surrendered ~40% of its early morning gains, closing near the day's low. The resources sector continued to weigh on the broader market, e.g. Beach Energy (BPT) -12.6%, Mineral Resources (MIN) -3.8%, Fortescue (FMG) -1.4%, and BHP group (BHP) -0.5%. The banks again boosted the index from a points perspective, although the retailers provided some of the best performances after JB Hi-Fi’s (JBH) solid result, plus a surprise 80c fully franked special dividend and a positive trading update for July helped send the household name up over 8%.
A quick look at the US VIX (volatility) Index, largely renamed “Fear Gauge,” puts the last few weeks' panic selling into perspective. The BOJ's rate hike, combined with fears that the Fed was going to push the US into a recession by cutting interest rates too slowly, sent shockwaves through global equities, although ultimately, the ASX200 and S&P 500 only fell 6.4% and 9.7%, respectively. However, it was the manner of sharp declines which caught a relatively complacent market, which had been revelling in new all-time highs through much of July, napping:
The market clearly doubts whether the RBA seriously considered another hike. We’ve been saying for months that the RBA doesn’t want to hike, although it's not totally off the table, and this view still feels on point. A few days of market volatility, largely driven by the unwind of the “Yen Carry Trade”, isn’t enough to make central banks cut interest rates; inflation is their primary focus, although they will remain vigilant to external circumstances, including ongoing market volatility. If we stand back and put things into context, the ASX200 is up +1.2% in 2024 and posted new all-time highs last week, numbers that shouldn’t unsettle the RBA.
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.
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.
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.
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.
The ASX200 recovered a further +0.5% on Monday, although it wasn’t an overly impressive day for the Australian market. The local index surrendered ~40% of its early morning gains, closing near the day's low. The resources sector continued to weigh on the broader market, e.g. Beach Energy (BPT) -12.6%, Mineral Resources (MIN) -3.8%, Fortescue (FMG) -1.4%, and BHP group (BHP) -0.5%. The banks again boosted the index from a points perspective, although the retailers provided some of the best performances after JB Hi-Fi’s (JBH) solid result, plus a surprise 80c fully franked special dividend and a positive trading update for July helped send the household name up over 8%.
A quick look at the US VIX (volatility) Index, largely renamed “Fear Gauge,” puts the last few weeks' panic selling into perspective. The BOJ's rate hike, combined with fears that the Fed was going to push the US into a recession by cutting interest rates too slowly, sent shockwaves through global equities, although ultimately, the ASX200 and S&P 500 only fell 6.4% and 9.7%, respectively. However, it was the manner of sharp declines which caught a relatively complacent market, which had been revelling in new all-time highs through much of July, napping:
The market clearly doubts whether the RBA seriously considered another hike. We’ve been saying for months that the RBA doesn’t want to hike, although it's not totally off the table, and this view still feels on point. A few days of market volatility, largely driven by the unwind of the “Yen Carry Trade”, isn’t enough to make central banks cut interest rates; inflation is their primary focus, although they will remain vigilant to external circumstances, including ongoing market volatility. If we stand back and put things into context, the ASX200 is up +1.2% in 2024 and posted new all-time highs last week, numbers that shouldn’t unsettle the RBA.
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