The ASX200 rallied yesterday following the Australian CPI data which showed inflation had jumped to 6.1%, although this was still a fresh 20-year high it was encouragingly below the consensus 6.3% expected by the market – as we wrote on Wednesday “bond traders have been a touch too hawkish since May”. However on every level where we looked prices were higher with the only question being how much!
Equities have slipped into a holding pattern ahead of today’s Australian inflation data and the FOMC’s decision on US interest rates which will be delivered when most of us will be sound asleep tonight. The high likelihood is volatility will kick in after both releases but we are becoming increasingly mindful that over the last few months markets have been pricing in the worst-case scenario for both inflation & bond yields, especially in some pockets of the share market.
The ASX200 had a very quiet start to the week on the index level as local stocks largely ignored Friday’s weakness on Wall Street, most of the action on the ASX unfolded on the stock level as the quarterly updates gathered momentum. Overall the broad market largely struggled on Monday with less than 40% of stocks advancing but a rally by the influential large cap miners was enough to offset softness elsewhere. Aside from confession season this week looks set to be all about inflation & interest rates, yet again!
Both US and local stocks are bouncing on cue helped by a market that found itself positioned with a record bearish bias resulting in a dearth of fresh sellers without supporting bad news but as the chart below illustrates this is slowly moving back to more sustainable levels as global indices grind higher. In our opinion sentiment still remains a touch too bearish across major indicators and as we’ve discussed over the last few months it’s this very same ingrained negative outlook towards risks assets that’s been the catalyst to allow equities to recover from their mid-June lows even if most investors continue to worry around the economic risks of soaring inflation/rate rises and a looming recession.
The ASX200 enjoyed a noticeably strong match-out yesterday in what had been a fairly lacklustre session, the market finally closed up +0.5% showing a current lack of appetite to go home short, it’s feeling like a classic “bear squeeze” i.e. just what MM has been looking for since mid-June. To back up our opinion the recent stock/sector rotation back into the underperformers of 2022 reaffirms our view that we’re seeing capitulation by bearish traders as opposed to a meaningful change in trend i.e. a quick glance at yesterday’s 5 best performers and their performance through 2022 paints a very clear “short squeeze” picture:
The ASX200 surged higher on Wednesday following a strong lead from Wall Street as traders appeared to bet that we’ve seen a meaningful bottom by equities i.e. the S&P500 has corrected -25% and the ASX200 -16%. There were a couple of catalysts for the strong rally by the broad market including good old fashion company earnings which are starting to paint a picture that businesses are coping far better with the macro headwinds than was previously feared i.e. investors are expecting boards to mention inflation, Covid and supply chain concerns leaving relatively little left to scare the market, at least for now:
Our Research Lead made a comment yesterday that the “markets changing its tone like a cut snake!” as yet again on Tuesday we saw the relative sector performance reverse from the previous few sessions following the hawkish RBA minutes which sent investors back into “risk off” mode however I replied with “Remember your time frames H!”, this brief conversation resulted in today’s title and opening few paragraphs as we focus our efforts on optimum portfolio composition for the quarters and years ahead, not just a few days/weeks! The ASX200 is in the midst of its 6th week of rotation around the 6600 area i.e. anyone getting too...
The ASX200 enjoyed a strong Monday taking its lead from US indices both on Friday night and the S&P500 futures during our day session i.e. the broad-based US index rallied +1.9% on Friday and the futures were up another +0.7% when the ASX closed yesterday. The buying was broad-based on Monday with over 75% of stocks rallying as “risk on” was clearly the theme of the day with the IT, Resources & Energy Sectors all rallying by over 2% - at least one day this week when the local market followed the MM roadmap! The big news yesterday was ANZ’s acquisition of Suncorp’s bank for $4.9bn which in our opinion added further credibility to yesterday’s advance:
This morning we’ve evolved the title of the last two weeks Macro Report from “Here comes the bounce – 1 & 2” to one of two main catalysts which MM can see driving such a bounce although we will touch on both. Firstly, the influential Banking Sector which has been under pressure all year in the US, whereas locally the weakness has only noticeably unfolded from April, on Friday the US KBW Bank Index surged +5.8% following a strong 2nd quarter result from Citigroup which sent its stock up +13% plus Wells Fargo rallied +6.2% after delivering a lift in net interest income. Importantly at least for the next few months we now believe the...
The ASX200 shrugged off red hot US inflation on Thursday to eke out a solid +0.4% gain with Tech stocks finally leading the line even as bond yields rallied and pundits started weighing up whether the Fed would follow the Bank of Canada and hike interest rates by 1% come their July 28th meeting - it feels almost ironic that markets are convinced interest rates will accelerate higher just as a 3rd wave of Covid casts another dark shadow over the economy. Bond markets are effectively telling us they have very little faith that the Fed can successfully & orderly navigate the current 40-year high inflation rate:
Equities have slipped into a holding pattern ahead of today’s Australian inflation data and the FOMC’s decision on US interest rates which will be delivered when most of us will be sound asleep tonight. The high likelihood is volatility will kick in after both releases but we are becoming increasingly mindful that over the last few months markets have been pricing in the worst-case scenario for both inflation & bond yields, especially in some pockets of the share market.
The ASX200 had a very quiet start to the week on the index level as local stocks largely ignored Friday’s weakness on Wall Street, most of the action on the ASX unfolded on the stock level as the quarterly updates gathered momentum. Overall the broad market largely struggled on Monday with less than 40% of stocks advancing but a rally by the influential large cap miners was enough to offset softness elsewhere. Aside from confession season this week looks set to be all about inflation & interest rates, yet again!
Both US and local stocks are bouncing on cue helped by a market that found itself positioned with a record bearish bias resulting in a dearth of fresh sellers without supporting bad news but as the chart below illustrates this is slowly moving back to more sustainable levels as global indices grind higher. In our opinion sentiment still remains a touch too bearish across major indicators and as we’ve discussed over the last few months it’s this very same ingrained negative outlook towards risks assets that’s been the catalyst to allow equities to recover from their mid-June lows even if most investors continue to worry around the economic risks of soaring inflation/rate rises and a looming recession.
The ASX200 enjoyed a noticeably strong match-out yesterday in what had been a fairly lacklustre session, the market finally closed up +0.5% showing a current lack of appetite to go home short, it’s feeling like a classic “bear squeeze” i.e. just what MM has been looking for since mid-June. To back up our opinion the recent stock/sector rotation back into the underperformers of 2022 reaffirms our view that we’re seeing capitulation by bearish traders as opposed to a meaningful change in trend i.e. a quick glance at yesterday’s 5 best performers and their performance through 2022 paints a very clear “short squeeze” picture:
The ASX200 surged higher on Wednesday following a strong lead from Wall Street as traders appeared to bet that we’ve seen a meaningful bottom by equities i.e. the S&P500 has corrected -25% and the ASX200 -16%. There were a couple of catalysts for the strong rally by the broad market including good old fashion company earnings which are starting to paint a picture that businesses are coping far better with the macro headwinds than was previously feared i.e. investors are expecting boards to mention inflation, Covid and supply chain concerns leaving relatively little left to scare the market, at least for now:
Our Research Lead made a comment yesterday that the “markets changing its tone like a cut snake!” as yet again on Tuesday we saw the relative sector performance reverse from the previous few sessions following the hawkish RBA minutes which sent investors back into “risk off” mode however I replied with “Remember your time frames H!”, this brief conversation resulted in today’s title and opening few paragraphs as we focus our efforts on optimum portfolio composition for the quarters and years ahead, not just a few days/weeks! The ASX200 is in the midst of its 6th week of rotation around the 6600 area i.e. anyone getting too...
The ASX200 enjoyed a strong Monday taking its lead from US indices both on Friday night and the S&P500 futures during our day session i.e. the broad-based US index rallied +1.9% on Friday and the futures were up another +0.7% when the ASX closed yesterday. The buying was broad-based on Monday with over 75% of stocks rallying as “risk on” was clearly the theme of the day with the IT, Resources & Energy Sectors all rallying by over 2% - at least one day this week when the local market followed the MM roadmap! The big news yesterday was ANZ’s acquisition of Suncorp’s bank for $4.9bn which in our opinion added further credibility to yesterday’s advance:
This morning we’ve evolved the title of the last two weeks Macro Report from “Here comes the bounce – 1 & 2” to one of two main catalysts which MM can see driving such a bounce although we will touch on both. Firstly, the influential Banking Sector which has been under pressure all year in the US, whereas locally the weakness has only noticeably unfolded from April, on Friday the US KBW Bank Index surged +5.8% following a strong 2nd quarter result from Citigroup which sent its stock up +13% plus Wells Fargo rallied +6.2% after delivering a lift in net interest income. Importantly at least for the next few months we now believe the...
The ASX200 shrugged off red hot US inflation on Thursday to eke out a solid +0.4% gain with Tech stocks finally leading the line even as bond yields rallied and pundits started weighing up whether the Fed would follow the Bank of Canada and hike interest rates by 1% come their July 28th meeting - it feels almost ironic that markets are convinced interest rates will accelerate higher just as a 3rd wave of Covid casts another dark shadow over the economy. Bond markets are effectively telling us they have very little faith that the Fed can successfully & orderly navigate the current 40-year high inflation rate:
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