The ASX200 enjoyed another strong session on Wednesday to close the day up +0.3%, taking it back above the psychological 6800 level. Most of the action on a relatively quiet day unfolded on the stock level with the battery metal stocks bouncing nicely whereas one of MM’s holdings Megaport (MP1) was clobbered after failing to meet growth expectations, more on this later. We continue to feel the path of least resistance for stocks is on the upside as we approach the Fed’s interest rate decision in 2-weeks’ time and of course a potential “Christmas Rally”...
Earlier this month we saw the RBA hike rates by only 0.25% when most pundits thought they would go 0.5%, over the last 2-weeks slowly but surely the markets are starting to embrace the possibility that bond yields are close to an inflection point and the inversely correlated rate sensitive stocks/sectors a bottom e.g. Tech, Consumer Discretionary and Real Estate. At MM we’ve stuck to our contrarian view that equities will be higher come Christmas, led by the high Beta Tech Sector, and yesterday we saw how easily some of these stocks can pop when sentiment turns, only slightly:
The ASX200 surrendered most of Friday’s gains yesterday as the market continues to rotate in the 6500-6800 region, it was the heavyweight resource stocks that weighed on Monday while the banks continued to look solid. Weakness was not too broad-based with 20% of stocks advancing but with BHP Group (BHP) -2.3%, RIO Tinto (RIO) -2.6% and CSL (CSL) -1.3% it’s hard for the index to perform on the day.
Last week saw another admirable attempt by stocks to rally quickly fade away as investors remembered the looming Fed rate hike on the 2nd of November. On Thursday night US stocks roared higher even as the CPI Inflation print came in hotter than expected but after a report on Friday showed that inflation expectations over the year ahead had risen for the 1st time in 7-months it was one step too far for the bulls to fight the ingrained downtrend and the Dow proceeded to tumble over 400-points, surrendering almost 50% of the previous day’s rally in the process.
The ASX200 tried to rally yesterday but nerves ahead of the pending US CPI crept in after midday and the market surrendered its earlier 40-point advance. There were a couple of fascinating moves within the Resources Sector which could just be the start of some meaningful changes to some entrenched trends of 2022, it smells like “the game is afoot”:
The ASX200 managed to ignore overnight wobbles on Wall Street to close marginally higher on Wednesday courtesy of a stellar session for the banks following an extremely bullish interpretation of the Bank of Queensland’s (BOQ) FY22 result – cash earnings were actually ~1% below consensus but the net interest margin was 2.5% above expectations, costs were lower while the top line increased, the board talked a solid game over the medium-term and as we’ve been discussing over recent weeks there appeared few people left to sell after the regional banks already corrected 35% over the last year, while the...
A week ago the RBA demonstrated some admirable independence by hiking interest rates by a moderate +0.25%, ignoring hawkish rhetoric from other major central banks in the process, it was enough to send local 10-year yields down almost 0.5% to 3.6% and stocks to their best 2-day rally in 2-years. However just one week later the 10’s are back above 4% and the ASX200 has already surrendered 44% of its gains, in our opinion the latter is still a good performance when we consider US stocks are plumbing fresh 2022 lows but the markets “look & feel” is certainly not bullish yet.
The ASX200 struggled yesterday following a poor night on Wall Street coupled with the S&P500 futures pointing to a very shaky start to the week for US stocks, the local index finally closed down -1.4% with over 90% of stocks closing in the red. As expected the growth stocks bore the brunt of the selling following the strong US Employment data on Friday night as they continue to dance to the bond yields tune i.e. rising bond yields continue to weigh on stocks and in particular the likes of tech.
Please excuse the last few month’s fascination with bonds but last week painted a pretty conclusive picture of how bond yields continue to dictate the price of risk assets and in particular stocks.
The ASX200 had a quiet Thursday, especially when compared to the previous two sessions, the index closed up less than 2-points with losers actually slightly outnumbering the winners. Another strong performance by the Energy Sector managed to edge the index higher but outside of the likes of Whitehaven Coal (WHC) and Woodside Energy (WDS) it was a relatively uneventful trading day which felt at its most comfortable trading basically unchanged – no great surprise after already rallying +6.5% from Monday’s intra-day low.
Earlier this month we saw the RBA hike rates by only 0.25% when most pundits thought they would go 0.5%, over the last 2-weeks slowly but surely the markets are starting to embrace the possibility that bond yields are close to an inflection point and the inversely correlated rate sensitive stocks/sectors a bottom e.g. Tech, Consumer Discretionary and Real Estate. At MM we’ve stuck to our contrarian view that equities will be higher come Christmas, led by the high Beta Tech Sector, and yesterday we saw how easily some of these stocks can pop when sentiment turns, only slightly:
The ASX200 surrendered most of Friday’s gains yesterday as the market continues to rotate in the 6500-6800 region, it was the heavyweight resource stocks that weighed on Monday while the banks continued to look solid. Weakness was not too broad-based with 20% of stocks advancing but with BHP Group (BHP) -2.3%, RIO Tinto (RIO) -2.6% and CSL (CSL) -1.3% it’s hard for the index to perform on the day.
Last week saw another admirable attempt by stocks to rally quickly fade away as investors remembered the looming Fed rate hike on the 2nd of November. On Thursday night US stocks roared higher even as the CPI Inflation print came in hotter than expected but after a report on Friday showed that inflation expectations over the year ahead had risen for the 1st time in 7-months it was one step too far for the bulls to fight the ingrained downtrend and the Dow proceeded to tumble over 400-points, surrendering almost 50% of the previous day’s rally in the process.
The ASX200 tried to rally yesterday but nerves ahead of the pending US CPI crept in after midday and the market surrendered its earlier 40-point advance. There were a couple of fascinating moves within the Resources Sector which could just be the start of some meaningful changes to some entrenched trends of 2022, it smells like “the game is afoot”:
The ASX200 managed to ignore overnight wobbles on Wall Street to close marginally higher on Wednesday courtesy of a stellar session for the banks following an extremely bullish interpretation of the Bank of Queensland’s (BOQ) FY22 result – cash earnings were actually ~1% below consensus but the net interest margin was 2.5% above expectations, costs were lower while the top line increased, the board talked a solid game over the medium-term and as we’ve been discussing over recent weeks there appeared few people left to sell after the regional banks already corrected 35% over the last year, while the...
A week ago the RBA demonstrated some admirable independence by hiking interest rates by a moderate +0.25%, ignoring hawkish rhetoric from other major central banks in the process, it was enough to send local 10-year yields down almost 0.5% to 3.6% and stocks to their best 2-day rally in 2-years. However just one week later the 10’s are back above 4% and the ASX200 has already surrendered 44% of its gains, in our opinion the latter is still a good performance when we consider US stocks are plumbing fresh 2022 lows but the markets “look & feel” is certainly not bullish yet.
The ASX200 struggled yesterday following a poor night on Wall Street coupled with the S&P500 futures pointing to a very shaky start to the week for US stocks, the local index finally closed down -1.4% with over 90% of stocks closing in the red. As expected the growth stocks bore the brunt of the selling following the strong US Employment data on Friday night as they continue to dance to the bond yields tune i.e. rising bond yields continue to weigh on stocks and in particular the likes of tech.
Please excuse the last few month’s fascination with bonds but last week painted a pretty conclusive picture of how bond yields continue to dictate the price of risk assets and in particular stocks.
The ASX200 had a quiet Thursday, especially when compared to the previous two sessions, the index closed up less than 2-points with losers actually slightly outnumbering the winners. Another strong performance by the Energy Sector managed to edge the index higher but outside of the likes of Whitehaven Coal (WHC) and Woodside Energy (WDS) it was a relatively uneventful trading day which felt at its most comfortable trading basically unchanged – no great surprise after already rallying +6.5% from Monday’s intra-day low.
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