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 edged higher yesterday in quiet trading compounding its gains for 2023 to 6% after just 3 weeks of trading, the index was actually higher earlier in the day but some selling, most notably across iron ore names, was enough to see the index surrender 75% of the early advance. The broad-based market is starting to feel understandably tired after surging well over 1000 points in less than 4 months although the Tech Sector is finally attracting some buying as inflation fears subside.
Australian stocks continue to defy gravity and overall investor sentiment, this morning they look set to open less than 2% below last year’s all-time high even while interest rates soar, housing prices fall and US stocks struggle i.e. the S&P500 closed higher on Friday but still a painful 21% below its last 2021 top. It’s not just the obvious miners that are dragging the ASX higher the banks remain very strong with heavyweight CBA less than 1.5% below its top before we even consider its excellent yield.
The ASX200 put in an extremely impressive performance yesterday rallying +0.57% posting its highest level since May in the process, all after the Dow had tumbled more than 600 points following weak economic data (Retail Sales & Producer Price Index). On Thursday we saw Australian unemployment unexpectedly nudge higher to 3.5% while the participation rate dropped 0.2% following a surprise drop in employment, as would be expected bond yields fell as investors hoped for the end to rate hikes sooner rather than later. Under the hood the story remains a touch clouded:
The ASX200 edged up +0.1% yesterday helped by further gains by the Tech Sector while losses in Real Estate & Utilities dragged on the index although it was overall a quiet day illustrated by only two stocks on the main board moving by more than 5%. The Bank of Japan (BOJ) produced the most fireworks during the lacklustre session when they surprised many pundits ignoring market speculation/expectations for policy tweaks sending the Yen tumbling in the process. There were some major moves at 2 pm on the announcement albeit fleeting in some cases:
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 edged higher yesterday in quiet trading compounding its gains for 2023 to 6% after just 3 weeks of trading, the index was actually higher earlier in the day but some selling, most notably across iron ore names, was enough to see the index surrender 75% of the early advance. The broad-based market is starting to feel understandably tired after surging well over 1000 points in less than 4 months although the Tech Sector is finally attracting some buying as inflation fears subside.
Australian stocks continue to defy gravity and overall investor sentiment, this morning they look set to open less than 2% below last year’s all-time high even while interest rates soar, housing prices fall and US stocks struggle i.e. the S&P500 closed higher on Friday but still a painful 21% below its last 2021 top. It’s not just the obvious miners that are dragging the ASX higher the banks remain very strong with heavyweight CBA less than 1.5% below its top before we even consider its excellent yield.
The ASX200 put in an extremely impressive performance yesterday rallying +0.57% posting its highest level since May in the process, all after the Dow had tumbled more than 600 points following weak economic data (Retail Sales & Producer Price Index). On Thursday we saw Australian unemployment unexpectedly nudge higher to 3.5% while the participation rate dropped 0.2% following a surprise drop in employment, as would be expected bond yields fell as investors hoped for the end to rate hikes sooner rather than later. Under the hood the story remains a touch clouded:
The ASX200 edged up +0.1% yesterday helped by further gains by the Tech Sector while losses in Real Estate & Utilities dragged on the index although it was overall a quiet day illustrated by only two stocks on the main board moving by more than 5%. The Bank of Japan (BOJ) produced the most fireworks during the lacklustre session when they surprised many pundits ignoring market speculation/expectations for policy tweaks sending the Yen tumbling in the process. There were some major moves at 2 pm on the announcement albeit fleeting in some cases:
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