Investors were fixated on central banks for most of last week as we saw the RBA, Fed, and BOE all hike interest rates pretty much in line with expectations but on Friday just when people were considering their weekend markets appeared to turn the page to another extremely important chapter:
Thursday saw the ASX200 get clobbered by the Feds sledgehammer, the index finally closed down -1.8% even after bouncing over 40-points from its intra-day low. The selling was broad-based with almost 90% of the market closing in negative territory as the recent buyers retreated into the shadows following the net hawkish rhetoric from Jerome Powell. However, we believe investors shouldn’t be too alarmed, as we touched on yesterday weakness is common in the 1st half of November.
Wednesday saw the ASX200 manage to shrug off weakness across US indices and instead focus on a healthy Asian region, it’s been a while since local stocks went looking for good news but two consecutive 0.25% rate hikes by the RBA when many expected/feared 0.5% moves appears to have been just the required tonic to awaken the bulls. Admittedly the market felt tired yesterday morning as it tested the psychological 7000 level and we shouldn’t disregard how far it has rallied in just one month:
The RBA raised interest rates to a nine-year high yesterday but the controlled 0.25% move was, as MM anticipate, enough to drive equities higher. As we’ve alluded to over the last month Philip Lowe et al appear keen to adopt a more cautious stance as signs emerge that the Australian consumer is coming under increasing pressure e.g. higher rates are really starting to weigh on that Australian sacred cow, housing prices. We continue to believe the rhetoric out of the RBA is slowly becoming more dovish:
The ASX200 enjoyed a strong end to October rallying over 1% following in the footsteps of Wall Street on Friday night – the ASX200 ended the month up +6% as we now head towards the seasonally strongest period of the year. Outside of the Resources/Energy Sectors losers were fairly thin on the ground as only 20% of the main board declined on the day - the RBA’s rate decision today didn’t appear to unnerve too many investors i.e. a controlled rate rise is “old news”.
If everybody was paying any attention to the press over the last few weeks investors would have continued their stampede for the exit door but even while the Bank of America Fund Manager Survey tells us, capitulation rules as professional investors have increased their cash levels to the highest in more than two decades as they maintain a maximum bearish outlook on the global economy over the next 12-months, equities have actually risen – the 3 most crowded trades are long the $US, short European equities and long ESG assets.
The ASX200 continues to climb a wall of worry closing up another +0.5% yesterday, well above the psychological 6800 level while also posting its best close in 6 weeks. The resources drove the market higher with heavyweights Woodside Energy (WDS), BHP Group (BHP), South32 (S32), and Newcrest Mining (NCM) all enjoying a good day at the office. If the banks had embraced ANZ’s result we could easily have seen ourselves challenging 6900 but for now, we’ll have to make do with an encouraging ~7% rally from this month’s low.
The ASX200 is starting to shrug off bad news as was evident yesterday when the local index gained +0.2% in the face of bearish news on both the Australian economy and the US corporate front:
The ASX200 rallied another +0.3% on Tuesday as it continues to toy with the psychological 6800 area, as we’ve said previously the market set-up is evolving with an uncanny resemblance to its look & feel through late June, into July. Four months ago once the consolidation was over the market rallied strongly without a backward glance, we are currently wary that many investors are too pre-occupied with the Fed’s interest rate decision and rhetoric next Tuesday when a more pragmatic and aggressive position towards stocks feels warranted as the current wave of selling appears to have exhausted itself.
The ASX200 rallied strongly yesterday following Wall Street’s lead on Friday night as opposed to the savage declines which rolled across Chinese-facing stocks as Xi Jinping took full control of the world’s 2nd largest economy. The local market may have closed up +1.5% but it still surrendered ~30% of its early gains as the Chinese stock market rout weighed on sentiment. However, there were some shining lights which caught our attention as over 85% of the market rallied:
Thursday saw the ASX200 get clobbered by the Feds sledgehammer, the index finally closed down -1.8% even after bouncing over 40-points from its intra-day low. The selling was broad-based with almost 90% of the market closing in negative territory as the recent buyers retreated into the shadows following the net hawkish rhetoric from Jerome Powell. However, we believe investors shouldn’t be too alarmed, as we touched on yesterday weakness is common in the 1st half of November.
Wednesday saw the ASX200 manage to shrug off weakness across US indices and instead focus on a healthy Asian region, it’s been a while since local stocks went looking for good news but two consecutive 0.25% rate hikes by the RBA when many expected/feared 0.5% moves appears to have been just the required tonic to awaken the bulls. Admittedly the market felt tired yesterday morning as it tested the psychological 7000 level and we shouldn’t disregard how far it has rallied in just one month:
The RBA raised interest rates to a nine-year high yesterday but the controlled 0.25% move was, as MM anticipate, enough to drive equities higher. As we’ve alluded to over the last month Philip Lowe et al appear keen to adopt a more cautious stance as signs emerge that the Australian consumer is coming under increasing pressure e.g. higher rates are really starting to weigh on that Australian sacred cow, housing prices. We continue to believe the rhetoric out of the RBA is slowly becoming more dovish:
The ASX200 enjoyed a strong end to October rallying over 1% following in the footsteps of Wall Street on Friday night – the ASX200 ended the month up +6% as we now head towards the seasonally strongest period of the year. Outside of the Resources/Energy Sectors losers were fairly thin on the ground as only 20% of the main board declined on the day - the RBA’s rate decision today didn’t appear to unnerve too many investors i.e. a controlled rate rise is “old news”.
If everybody was paying any attention to the press over the last few weeks investors would have continued their stampede for the exit door but even while the Bank of America Fund Manager Survey tells us, capitulation rules as professional investors have increased their cash levels to the highest in more than two decades as they maintain a maximum bearish outlook on the global economy over the next 12-months, equities have actually risen – the 3 most crowded trades are long the $US, short European equities and long ESG assets.
The ASX200 continues to climb a wall of worry closing up another +0.5% yesterday, well above the psychological 6800 level while also posting its best close in 6 weeks. The resources drove the market higher with heavyweights Woodside Energy (WDS), BHP Group (BHP), South32 (S32), and Newcrest Mining (NCM) all enjoying a good day at the office. If the banks had embraced ANZ’s result we could easily have seen ourselves challenging 6900 but for now, we’ll have to make do with an encouraging ~7% rally from this month’s low.
The ASX200 is starting to shrug off bad news as was evident yesterday when the local index gained +0.2% in the face of bearish news on both the Australian economy and the US corporate front:
The ASX200 rallied another +0.3% on Tuesday as it continues to toy with the psychological 6800 area, as we’ve said previously the market set-up is evolving with an uncanny resemblance to its look & feel through late June, into July. Four months ago once the consolidation was over the market rallied strongly without a backward glance, we are currently wary that many investors are too pre-occupied with the Fed’s interest rate decision and rhetoric next Tuesday when a more pragmatic and aggressive position towards stocks feels warranted as the current wave of selling appears to have exhausted itself.
The ASX200 rallied strongly yesterday following Wall Street’s lead on Friday night as opposed to the savage declines which rolled across Chinese-facing stocks as Xi Jinping took full control of the world’s 2nd largest economy. The local market may have closed up +1.5% but it still surrendered ~30% of its early gains as the Chinese stock market rout weighed on sentiment. However, there were some shining lights which caught our attention as over 85% of the market rallied:
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