Last week saw some inconsistencies / fascinating moves across financial markets which we believe were largely driven by investor positioning & sentiment but this might not continue if MM’s preferred scenario unfolds for bond yields. Last week was all about the US CPI and Wednesday’s number showed a much-welcomed slowdown in inflation which sent most indices soaring to their highest levels in over 3-months:
The ASX200 roared higher on Thursday on optimism that peak inflation is behind us but not all parts of this fascinating puzzle are currently in alignment:
The ASX200 struggled on Wednesday with many traders taking a back seat ahead of last night’s important US CPI (inflation) data, the index ultimately closed down -0.5% basically at the same level we started August. Selling was broad-based with 70% of the main index closing in the red but with the influential Banking Sector closing higher, even as Commonwealth Bank (CBA) slipped -0.3%, losses were limited i.e. for fireworks to be lit under the index we generally need to see the Resources & Banks run in one direction.
On Friday we saw an extremely strong set of US Employment numbers increase expectations of a 75bp hike at the September FOMC meeting but tonight’s CPI and the plethora of Fed speakers enjoying the limelight in coming weeks are likely to see opinions swing between 75bp, and back towards 50bp. The markets have taken a definite shift towards a more hawkish stance since Friday and another strong CPI print could easily see US 10 years back above 3% which will pressure equities and especially the Tech Sector.
The ASX200 fought hard to overcome early weakness to close marginally higher on Monday although the gains were very stock / sector specific with under 40% of the main board managing to close in positive territory. Obviously the big news to kick off the week was BHP’s $8.3bn bid for “green metals” miner OZ Minerals (OZL) – more on this later, but the aggressive play by the “Big Australian” also added a tailwind to reverse some of the recent sector performance following the extremely strong US Jobs Report on Friday night which sent bond yields sharply higher:
This year we’ve seen stock market sectors dance to the inflation/interest rate tune whereas the underlying index has been a far harder tougher nut to fathom:
The ASX200 reversed early gains on Thursday to close marginally in the red as weakness in the influential Resources Sector more than offset ongoing strength from both the tech and banking stocks. The last few years have seen major stock & sector rotation within the ASX depending on the macro events in focus at the time, since mid-June its been all about bond yields correcting as central banks ease off their hawkish rhetoric while the risk of a recession in 2023 has been increasingly factored into the market, the moves over the last 7-weeks tells a clear tale:
The ASX200 slipped -0.3% yesterday with the banks weighing on the index while the less influential tech space rallied another +2.4%, the winners & losers were evenly matched on a day when bond yields continued to dictate terms under the market’s hood:
As I’m sure everybody knows by now that on Tuesday the RBA hiked local interest rates by 0.5% for the 3rd consecutive month, taking the Official Cash Rate to 1.85%. However there was a noticeable change in their rhetoric with Philip Lowe stating that the path ahead “is a narrow one clouded in uncertainty” and “that the board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it’s not on a pre-set path” – overall it sounded like he was echoing recent comments from the Fed as central banks clearly start...
The ASX200 rallied another +0.7% on Monday taking the index within a whisker of the psychological 7000 level although it was interesting to see the defensive stocks dominating the winner’s enclosure as opposed to the high beta growth names i.e. Utilities +2%, Healthcare +1.6% and Telcos +1.4% whereas the Consumer Discretionary -0.2% & Tech Sectors -0.4% slipped marginally lower. However at this stage MM is not reading anything into this minor sector rotation, it simply felt like some book squaring ahead of the RBA’s much-anticipated rate hike at 2.30 pm this afternoon:
The ASX200 roared higher on Thursday on optimism that peak inflation is behind us but not all parts of this fascinating puzzle are currently in alignment:
The ASX200 struggled on Wednesday with many traders taking a back seat ahead of last night’s important US CPI (inflation) data, the index ultimately closed down -0.5% basically at the same level we started August. Selling was broad-based with 70% of the main index closing in the red but with the influential Banking Sector closing higher, even as Commonwealth Bank (CBA) slipped -0.3%, losses were limited i.e. for fireworks to be lit under the index we generally need to see the Resources & Banks run in one direction.
On Friday we saw an extremely strong set of US Employment numbers increase expectations of a 75bp hike at the September FOMC meeting but tonight’s CPI and the plethora of Fed speakers enjoying the limelight in coming weeks are likely to see opinions swing between 75bp, and back towards 50bp. The markets have taken a definite shift towards a more hawkish stance since Friday and another strong CPI print could easily see US 10 years back above 3% which will pressure equities and especially the Tech Sector.
The ASX200 fought hard to overcome early weakness to close marginally higher on Monday although the gains were very stock / sector specific with under 40% of the main board managing to close in positive territory. Obviously the big news to kick off the week was BHP’s $8.3bn bid for “green metals” miner OZ Minerals (OZL) – more on this later, but the aggressive play by the “Big Australian” also added a tailwind to reverse some of the recent sector performance following the extremely strong US Jobs Report on Friday night which sent bond yields sharply higher:
This year we’ve seen stock market sectors dance to the inflation/interest rate tune whereas the underlying index has been a far harder tougher nut to fathom:
The ASX200 reversed early gains on Thursday to close marginally in the red as weakness in the influential Resources Sector more than offset ongoing strength from both the tech and banking stocks. The last few years have seen major stock & sector rotation within the ASX depending on the macro events in focus at the time, since mid-June its been all about bond yields correcting as central banks ease off their hawkish rhetoric while the risk of a recession in 2023 has been increasingly factored into the market, the moves over the last 7-weeks tells a clear tale:
The ASX200 slipped -0.3% yesterday with the banks weighing on the index while the less influential tech space rallied another +2.4%, the winners & losers were evenly matched on a day when bond yields continued to dictate terms under the market’s hood:
As I’m sure everybody knows by now that on Tuesday the RBA hiked local interest rates by 0.5% for the 3rd consecutive month, taking the Official Cash Rate to 1.85%. However there was a noticeable change in their rhetoric with Philip Lowe stating that the path ahead “is a narrow one clouded in uncertainty” and “that the board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it’s not on a pre-set path” – overall it sounded like he was echoing recent comments from the Fed as central banks clearly start...
The ASX200 rallied another +0.7% on Monday taking the index within a whisker of the psychological 7000 level although it was interesting to see the defensive stocks dominating the winner’s enclosure as opposed to the high beta growth names i.e. Utilities +2%, Healthcare +1.6% and Telcos +1.4% whereas the Consumer Discretionary -0.2% & Tech Sectors -0.4% slipped marginally lower. However at this stage MM is not reading anything into this minor sector rotation, it simply felt like some book squaring ahead of the RBA’s much-anticipated rate hike at 2.30 pm this afternoon:
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