Tuesday was all about the RBA and the unexpected hawkish comments delivered by the RBA Governor. Stocks reversed lower in a matter of minutes after the 230pm decision as investors contemplated rates breaking above 4% before Christmas, the ASX200 finished the day down -0.5% on broad-based selling which saw less than 30% of stocks post gains.
The ASX200 ended Monday down -0.25% following Friday’s weak session on Wall Street coupled with follow-through selling in the pre-market S&P500 futures. The weakness was broad-based with less than 30% of the main index closing in positive territory with the winner’s circle being dominated by the energy and gold names - more on the precious metal later following Newmont’s (NEM US) bid for Newcrest (NCM).
The AFR proudly announced in “Street Talk” yesterday afternoon that $20bn Newcrest Mining (NCM) might be about to receive a bid with the likely suitors being touted as either Barrick Gold Corp (GOLD US) or Newmont Corp (NEM US), either way, all we can say is bring it on! - we hold 5% of our Flagship Growth Portfolio in NCM.
The ASX200 ended yesterday’s mixed session up just 10 points but under the hood, it was a very eventful day even while the market maintained its magnetic attraction to the 7500 area. The interpretation of the Fed’s 0.25% rate hike and accompanying rhetoric delivered some very different performances on the stock & sector level:
The oil price has been range trading over the last 4 months albeit near the lower level of prices for the last 18 months. The US Energy Sector has significantly outperformed its Australian peers over the last year and although we believe both sectors are now looking tired its MM’s view that better risk/reward is now on offer locally however we’re conscious that in both absolute and relative terms trends have been extending post Covid hence we’re adopting a neutral bias at this stage until the next cycle shows its hand.
The local resources stocks have only slipped -2.3% from their January high but it feels more with a few prominent names on MM’s radar well below levels scaled over recent weeks e.g. South32 (S32) -6.8%, Mineral Resources (MIN) -8.3% and now after yesterday’s disappointing result IGO Ltd (IGO) -11.5%. As we said in the Tuesday Match Out Report when we reviewed IGO’s miss – “Downstream cost pressures are to blame which we think will be a common theme through this upcoming reporting period for the miners”. If this opinion proves correct and the $US can bounce back towards the 105-107 area the 3 pullbacks mentioned could easily double in a market that MM believe is complacently long miners.
January has delivered stellar gains for most stock market investors, the ASX200 has already surged +6.5% outperforming both the UK FTSE +4.2% and US S&P500 +6% although the Chinese CSI 300 Index +8% has caught our attention as markets embrace a “risk on” stance as the world 2nd largest economy reopens following its attempted and failed COVID Zero Policy. The performance of the local market on the sector level so far in 2023 illustrates this point perfectly:
The ASX200 slipped 22-points into Australia Day following the fortunes of Microsoft (MSFT US) closely through the US late trading session i.e. MSFT opened up ~5% after its quarterly reports saw a beat on the EPS front however following a muted management presentation the stock reversed to be down -1%, taking the wind out of the sails of a previously strong local Tech Sector which ultimately closed down -1.2% after a promising start. Gold stocks also experienced some noticeable selling with Newcrest (NCM) and Evolution (EVN) both reversing lower after hitting fresh 7-month highs during the morning.
The US S&P500 Value Index is less than 5% below its all-time high while the Growth index continues to languish a painful 28% below its equivalent milestone. We may have seen the likes of Netflix (NFLX US) double in 6 months but they remain significantly below their late 2021 high. As subscribers know with interest rates soaring from their ultra-accommodative levels post Covid to arguably the new norm investors shouldn’t be surprised by the market rerating of the growth stocks.
The ASX200 ended Monday down -0.25% following Friday’s weak session on Wall Street coupled with follow-through selling in the pre-market S&P500 futures. The weakness was broad-based with less than 30% of the main index closing in positive territory with the winner’s circle being dominated by the energy and gold names - more on the precious metal later following Newmont’s (NEM US) bid for Newcrest (NCM).
The AFR proudly announced in “Street Talk” yesterday afternoon that $20bn Newcrest Mining (NCM) might be about to receive a bid with the likely suitors being touted as either Barrick Gold Corp (GOLD US) or Newmont Corp (NEM US), either way, all we can say is bring it on! - we hold 5% of our Flagship Growth Portfolio in NCM.
The ASX200 ended yesterday’s mixed session up just 10 points but under the hood, it was a very eventful day even while the market maintained its magnetic attraction to the 7500 area. The interpretation of the Fed’s 0.25% rate hike and accompanying rhetoric delivered some very different performances on the stock & sector level:
The oil price has been range trading over the last 4 months albeit near the lower level of prices for the last 18 months. The US Energy Sector has significantly outperformed its Australian peers over the last year and although we believe both sectors are now looking tired its MM’s view that better risk/reward is now on offer locally however we’re conscious that in both absolute and relative terms trends have been extending post Covid hence we’re adopting a neutral bias at this stage until the next cycle shows its hand.
The local resources stocks have only slipped -2.3% from their January high but it feels more with a few prominent names on MM’s radar well below levels scaled over recent weeks e.g. South32 (S32) -6.8%, Mineral Resources (MIN) -8.3% and now after yesterday’s disappointing result IGO Ltd (IGO) -11.5%. As we said in the Tuesday Match Out Report when we reviewed IGO’s miss – “Downstream cost pressures are to blame which we think will be a common theme through this upcoming reporting period for the miners”. If this opinion proves correct and the $US can bounce back towards the 105-107 area the 3 pullbacks mentioned could easily double in a market that MM believe is complacently long miners.
January has delivered stellar gains for most stock market investors, the ASX200 has already surged +6.5% outperforming both the UK FTSE +4.2% and US S&P500 +6% although the Chinese CSI 300 Index +8% has caught our attention as markets embrace a “risk on” stance as the world 2nd largest economy reopens following its attempted and failed COVID Zero Policy. The performance of the local market on the sector level so far in 2023 illustrates this point perfectly:
The ASX200 slipped 22-points into Australia Day following the fortunes of Microsoft (MSFT US) closely through the US late trading session i.e. MSFT opened up ~5% after its quarterly reports saw a beat on the EPS front however following a muted management presentation the stock reversed to be down -1%, taking the wind out of the sails of a previously strong local Tech Sector which ultimately closed down -1.2% after a promising start. Gold stocks also experienced some noticeable selling with Newcrest (NCM) and Evolution (EVN) both reversing lower after hitting fresh 7-month highs during the morning.
The US S&P500 Value Index is less than 5% below its all-time high while the Growth index continues to languish a painful 28% below its equivalent milestone. We may have seen the likes of Netflix (NFLX US) double in 6 months but they remain significantly below their late 2021 high. As subscribers know with interest rates soaring from their ultra-accommodative levels post Covid to arguably the new norm investors shouldn’t be surprised by the market rerating of the growth stocks.
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