The ASX200 has embraced the saying “what a difference a day makes” in consummate style over the last 48 hours i.e. down aggressively on Tuesday following the BoJ’s hawkish tweak on interest rate policy followed by a +1.3% recovery yesterday, the net difference being down just 18 points. The local market’s advance yesterday was broad-based with over 85% of the main board rising as the bulls again started talking up the prospects of a late Christmas rally – certainly, anything is possible as volumes start to decline. There were a few standout sector performances as the news from Japan was dismissed almost as fast as it arrived:
The Bank of Japan (BOJ) shocked financial markets at 2 pm AEST when they adjusted their yield curve control program, in simple English they will allow Japan’s 10-year bond yields to rise to ~0.5% from the previous upper limit of 0.25% - at MM we all wish we could borrow money for 10-years at 0.5%, that would make a lovely present from Santa. However, at the same time, the central bank kept its short-term interest rates at minus -0.1%, significantly below the likes of Australia, Europe and the US.
The ASX200 put in a valiant effort yesterday considering Friday’s weakness on Wall Street, for much of the session it actually felt like we were witnessing the dawn of another “Christmas Rally” before the index ultimately closed down just -0.2% with the Real Estate Sector falling -1.1% the weakest link. Conversely, the Energy Sector again rallied solidly led by the coal names with Whitehaven (WHC) now only ~4% away from making fresh all-time highs.
As most readers would know last week saw central banks continue to hike interest rates with total disregard for Christmas cheer, the hikes and net hawkish rhetoric weighed on equities making a “Christmas Rally” start to feel like the proverbial pipe dream – any other time of the year and we would say no way but history tells us to never discount a run by stocks into Christmas and the year-end. Some fascinating moves unfolded on the macro level last week with very mixed messages for investors:
The ASX200 struggled again yesterday taking the market into negative territory for the week as weakness crept into the previously strong Resources Sector. The market has felt heavy over the last few weeks but at this stage, we’re still only -2.3% below the market’s recent high, very surmountable if we can regain our mojo after recent moves by central banks...
The ASX200 rallied strongly on Wednesday following the positive lead from the better-than-expected US CPI inflation print, we believe bond yields have peaked for now although the Fed have work to do even if the worst of US inflation may have passed. Stocks/sectors are taking some heart from recent Fed comments and Tuesday’s benign CPI read as we see some reversion to the dominant trends of 2022 start to slowly unfold, yesterday fitted into this story under the hood i.e. banks and resources were mixed while the tech stocks gained some traction.
Stock markets across the region rallied yesterday before last night’s much anticipated US CPI print that confirmed the heat is coming out of US inflation, just like it is in Australia, and the most aggressive tightening of monetary policy in history is working. Overnight, US headline inflation came in at 7.1% for November, down from 7.7% the prior month and below the 7.3% expected by the market. Stripping out the more volatile food and energy, core inflation was 6%, down from 6.3% and below the 6.1% expected. This created some fireworks in bond markets overnight, Treasuries...
The ASX200 slipped another -0.45% on Monday on broad-based selling which saw well over 60% of the main board close down for the day with the resources coming off the boil catching our attention after we trimmed our exposure last week. Elsewhere in what felt like a fairly quiet day with central banks sitting poised to dominate the news some buying crept into the tech space but there have been many false dawns on this front through 2022:
The combination of inflation, interest rates and bond yields have driven equities post-Covid, as global uncertainty escalated through/after the pandemic the RBA and US Federal Reserve cut interest rates to basically zero which propelled risk assets, including stocks, to fresh all-time highs. Unfortunately, the inability of these central banks to take some medicine early on and start slowly raising rates from say late 2020 has seen the inflation genie escape the lamp and the rest is already history i.e. the steepest, most aggressive series of interest rate hikes in history.
The ASX200 fell another -0.7% on Thursday dragged lower by broad-based selling and specific weakness across the influential banks and large-cap miners. A combination of the RBA hiking rates at the same time as growth data has started to soften has weighed on already nervous growth names while the China reopening play has started to lose momentum after pushing our Resources Sector significantly higher over recent weeks.
The Bank of Japan (BOJ) shocked financial markets at 2 pm AEST when they adjusted their yield curve control program, in simple English they will allow Japan’s 10-year bond yields to rise to ~0.5% from the previous upper limit of 0.25% - at MM we all wish we could borrow money for 10-years at 0.5%, that would make a lovely present from Santa. However, at the same time, the central bank kept its short-term interest rates at minus -0.1%, significantly below the likes of Australia, Europe and the US.
The ASX200 put in a valiant effort yesterday considering Friday’s weakness on Wall Street, for much of the session it actually felt like we were witnessing the dawn of another “Christmas Rally” before the index ultimately closed down just -0.2% with the Real Estate Sector falling -1.1% the weakest link. Conversely, the Energy Sector again rallied solidly led by the coal names with Whitehaven (WHC) now only ~4% away from making fresh all-time highs.
As most readers would know last week saw central banks continue to hike interest rates with total disregard for Christmas cheer, the hikes and net hawkish rhetoric weighed on equities making a “Christmas Rally” start to feel like the proverbial pipe dream – any other time of the year and we would say no way but history tells us to never discount a run by stocks into Christmas and the year-end. Some fascinating moves unfolded on the macro level last week with very mixed messages for investors:
The ASX200 struggled again yesterday taking the market into negative territory for the week as weakness crept into the previously strong Resources Sector. The market has felt heavy over the last few weeks but at this stage, we’re still only -2.3% below the market’s recent high, very surmountable if we can regain our mojo after recent moves by central banks...
The ASX200 rallied strongly on Wednesday following the positive lead from the better-than-expected US CPI inflation print, we believe bond yields have peaked for now although the Fed have work to do even if the worst of US inflation may have passed. Stocks/sectors are taking some heart from recent Fed comments and Tuesday’s benign CPI read as we see some reversion to the dominant trends of 2022 start to slowly unfold, yesterday fitted into this story under the hood i.e. banks and resources were mixed while the tech stocks gained some traction.
Stock markets across the region rallied yesterday before last night’s much anticipated US CPI print that confirmed the heat is coming out of US inflation, just like it is in Australia, and the most aggressive tightening of monetary policy in history is working. Overnight, US headline inflation came in at 7.1% for November, down from 7.7% the prior month and below the 7.3% expected by the market. Stripping out the more volatile food and energy, core inflation was 6%, down from 6.3% and below the 6.1% expected. This created some fireworks in bond markets overnight, Treasuries...
The ASX200 slipped another -0.45% on Monday on broad-based selling which saw well over 60% of the main board close down for the day with the resources coming off the boil catching our attention after we trimmed our exposure last week. Elsewhere in what felt like a fairly quiet day with central banks sitting poised to dominate the news some buying crept into the tech space but there have been many false dawns on this front through 2022:
The combination of inflation, interest rates and bond yields have driven equities post-Covid, as global uncertainty escalated through/after the pandemic the RBA and US Federal Reserve cut interest rates to basically zero which propelled risk assets, including stocks, to fresh all-time highs. Unfortunately, the inability of these central banks to take some medicine early on and start slowly raising rates from say late 2020 has seen the inflation genie escape the lamp and the rest is already history i.e. the steepest, most aggressive series of interest rate hikes in history.
The ASX200 fell another -0.7% on Thursday dragged lower by broad-based selling and specific weakness across the influential banks and large-cap miners. A combination of the RBA hiking rates at the same time as growth data has started to soften has weighed on already nervous growth names while the China reopening play has started to lose momentum after pushing our Resources Sector significantly higher over recent weeks.
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