Earlier this month, the Uranium Sector was one of the hottest in town, with Paladin (PDN) and Boss Energy (BOE) both up ~50% after only a few weeks of 2024, but here we are approaching the end of February, and the vast majority of the gains have evaporated in the blink of an eye. US giant Cameco Corp (CCJ US) was the catalyst after reporting its FY23 results earlier in the month.
AI is a new and exciting subject that has driven US equities to new all-time highs and has already started impacting most people's lives, even if they don’t yet realise it – it's an ever-changing world; only 18 months ago, US tech was struggling as rate rises weighed on growth stocks. Artificial intelligence, or AI, has been brewing as the new megatrend for years, with Nvidia now leading the charge. Unfortunately, the local market has few companies that look likely to mirror the performance of their US peers, but there will still be beneficiaries
The ASX200 struggled on Wednesday as reporting season delivered a couple of painful misses, but it was a weak few days for iron ore names that weighed the most on the local index, e.g. BHP Group (BHP) -2.4% and Fortescue Ltd (FMG) -3.4%. However, the Consumer Staples Sector took the wooden spoon yesterday, led lower by a -6.6% drop by Woolworths (WOW).
Yesterday, the Peoples Bank of China (PBOC) announced lenders had cut their 5-year loan prime rate (LPR) by 25 basis points to 3.95%; it was the first cut since June, reaffirming Xi Jinping's intentions to reinvigorate their economy, which the prolonged property crisis has weighed down. This was the biggest-ever cut to the key mortgage reference rate as Chinese banks cut rates to incentivise borrowing; the targeted stimulus will increase the potential pool of buyers as apartment prices continue to slip lower.
Whichever type of coal we look at, the pictures the same, one of panic buying through 2021 and 2022 followed by aggressive selling through 2023, creating huge volatility across the respective coal stocks. As with most commodities, China is by far the world's largest consumer of coal, and if/when Beijing lifts its struggling economy, the dial will likely edge higher on the demand side of the equation. Conversely, on the supply side of the ledger, new mines are becoming increasingly more challenging/ almost impossible to permit or fund on the global push towards decarbonisation.
China’s stock market went into its “Year of the Dragon” celebrations with a rare and much-needed bounce, with the index, ahead of last week’s break, up +8.3% from its 5-year low. However, it would be easy for the bears to justify the gains on simple book-squaring ahead of the long break. Still, at MM, we can see something more meaningful brewing beneath the surface, i.e. Chinese stocks are looking for a low after almost halving over the last two years. While there are no concrete fundamental or technical buy signals in place, we continue to believe a ~20% bounce, at the very least, is close at hand.
The US Real Estate Sector led equities higher overnight as pressure reduced on bond yields; the sector finished up +2.5% while the IT Sector actually closed lower. With investors struggling to justify the lofty valuations of many well-known stocks, the real estate names offer a degree of solace as they remain ~25% below their 2021 high, and interest rates looked to have peaked with the main question of when and how fast will the Fed cut as opposed to if they will cut.
The gold price is inversely correlated to both the bond yields and the $US, both of which have ticked higher so far in 2024; hence, precious metals have lost their lustre, sending gold stocks significantly lower as the sector remains largely friendless. At MM medium-term, we are looking for bond yields to turn lower, taking the $US and gold price with them, but at this stage, we are in no hurry to pre-empt the catalyst which will create such a move; hence MM reduced our Active Growth portfolio’s gold exposure in January.
Overnight US markets sold off aggressively after a hotter-than-expected CPI inflation read left the optimistic Doves near-term rate cut hopes in tatters. Bonds and stocks both slid following the release, which climbed the most in eight months just when investors were expecting confirmation that inflation is under control; the US 2s climbed back to levels not seen since the December central bank “pivot” – another example of crowded positioning coming under pressure. The release added credibility to Jerome Powell's “wait-and-see attitude”, with the futures now pricing in a Fed Funds rate of ~4.45% by Christmas, around four cuts.
Crude oil has been supported by major geo-political events since COVID, but it's not delivered an overly exciting performance from the ASX oil & gas names – uranium has been the big winner in the Energy Sector. The supply and demand fundamentals continue to concern some analysts as record U.S. production combined with a weak Chinese economy creates risks of oversupply, potentially offsetting tensions in the Middle East and the Russia/Ukraine war. Brent crude is trading around its average level of the last five years, albeit with some volatile spikes in both directions.
AI is a new and exciting subject that has driven US equities to new all-time highs and has already started impacting most people's lives, even if they don’t yet realise it – it's an ever-changing world; only 18 months ago, US tech was struggling as rate rises weighed on growth stocks. Artificial intelligence, or AI, has been brewing as the new megatrend for years, with Nvidia now leading the charge. Unfortunately, the local market has few companies that look likely to mirror the performance of their US peers, but there will still be beneficiaries
The ASX200 struggled on Wednesday as reporting season delivered a couple of painful misses, but it was a weak few days for iron ore names that weighed the most on the local index, e.g. BHP Group (BHP) -2.4% and Fortescue Ltd (FMG) -3.4%. However, the Consumer Staples Sector took the wooden spoon yesterday, led lower by a -6.6% drop by Woolworths (WOW).
Yesterday, the Peoples Bank of China (PBOC) announced lenders had cut their 5-year loan prime rate (LPR) by 25 basis points to 3.95%; it was the first cut since June, reaffirming Xi Jinping's intentions to reinvigorate their economy, which the prolonged property crisis has weighed down. This was the biggest-ever cut to the key mortgage reference rate as Chinese banks cut rates to incentivise borrowing; the targeted stimulus will increase the potential pool of buyers as apartment prices continue to slip lower.
Whichever type of coal we look at, the pictures the same, one of panic buying through 2021 and 2022 followed by aggressive selling through 2023, creating huge volatility across the respective coal stocks. As with most commodities, China is by far the world's largest consumer of coal, and if/when Beijing lifts its struggling economy, the dial will likely edge higher on the demand side of the equation. Conversely, on the supply side of the ledger, new mines are becoming increasingly more challenging/ almost impossible to permit or fund on the global push towards decarbonisation.
China’s stock market went into its “Year of the Dragon” celebrations with a rare and much-needed bounce, with the index, ahead of last week’s break, up +8.3% from its 5-year low. However, it would be easy for the bears to justify the gains on simple book-squaring ahead of the long break. Still, at MM, we can see something more meaningful brewing beneath the surface, i.e. Chinese stocks are looking for a low after almost halving over the last two years. While there are no concrete fundamental or technical buy signals in place, we continue to believe a ~20% bounce, at the very least, is close at hand.
The US Real Estate Sector led equities higher overnight as pressure reduced on bond yields; the sector finished up +2.5% while the IT Sector actually closed lower. With investors struggling to justify the lofty valuations of many well-known stocks, the real estate names offer a degree of solace as they remain ~25% below their 2021 high, and interest rates looked to have peaked with the main question of when and how fast will the Fed cut as opposed to if they will cut.
The gold price is inversely correlated to both the bond yields and the $US, both of which have ticked higher so far in 2024; hence, precious metals have lost their lustre, sending gold stocks significantly lower as the sector remains largely friendless. At MM medium-term, we are looking for bond yields to turn lower, taking the $US and gold price with them, but at this stage, we are in no hurry to pre-empt the catalyst which will create such a move; hence MM reduced our Active Growth portfolio’s gold exposure in January.
Overnight US markets sold off aggressively after a hotter-than-expected CPI inflation read left the optimistic Doves near-term rate cut hopes in tatters. Bonds and stocks both slid following the release, which climbed the most in eight months just when investors were expecting confirmation that inflation is under control; the US 2s climbed back to levels not seen since the December central bank “pivot” – another example of crowded positioning coming under pressure. The release added credibility to Jerome Powell's “wait-and-see attitude”, with the futures now pricing in a Fed Funds rate of ~4.45% by Christmas, around four cuts.
Crude oil has been supported by major geo-political events since COVID, but it's not delivered an overly exciting performance from the ASX oil & gas names – uranium has been the big winner in the Energy Sector. The supply and demand fundamentals continue to concern some analysts as record U.S. production combined with a weak Chinese economy creates risks of oversupply, potentially offsetting tensions in the Middle East and the Russia/Ukraine war. Brent crude is trading around its average level of the last five years, albeit with some volatile spikes in both directions.
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