Viewpoint: Bullish
US indices recovered strongly on Friday night to end the week mildly lower, this feels like another solid result considering the extremely hawkish 9.1% CPI print on Wednesday – the highest rate in over 40 years!
The ASX200 looks set to open around the 6675 level this morning after testing its 2-week low on Friday, if we are correct the recent consolidation pattern should finally break out on the upside towards the 6850-6900 area in the next few weeks:
MM felt US stocks delivered another strong performance overnight with the Dow bouncing almost 500-points from its early drop following the calming words from Fed members around rate hikes late this month i.e. a 0.75% move now looks more likely than 1%. However, the main market backbone was delivered by the tech stocks as they managed to close in positive territory after extreme hawkish fears subsided following these comments.
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…
SHV +1.35%: the almond grower provided a trading update following the completion of their latest harvest saying 100% of the almonds had now been secured. There were some drawbacks though with wet weather meaning a portion of the crop would need to be mechanically dried at a cost, while freight remains an issue and will likely push out any cash flow. These issues were largely well understood…
PLS +3.81%: auctions off a small amount of their production and the prices achieved were slightly lower than the prices achieved 3 weeks ago for a similar sort of cargo implying that Lithium prices may have peaked. The discount was small (~2.5%) and the bidding was still strong, but the heat has come out of the market it seems. That shouldn’t come as a surprise and the equities have clearly priced this in., hence the move higher today given the discount was only slim.
The backstory is that in 2020 China put bans on using Aussie coal which impacted met coal (used in Steelmaking) more so than thermal coal (used in power generation) suggesting that any ban unwind might benefit met coal volumes and prices. It’s been an amazing couple of years in the coal market – the so called old energy on a pathway to oblivion … yet the best commodity performer in FY22 and the best so far in FY23 to date.
MM felt US stocks delivered a stellar performance overnight rallying from steep early losses to close little changed e.g. the NASDAQ was down -2% following the hawkish CPI but it managed to claw back basically all of these losses to end the day down only -0.1%. We still believe the battered heavyweight US tech stocks can drag the US market higher with the next 24-48 hours likely to reveal all as investors further digest the overnight CPI data but a market that doesn’t fall on bad news is usually strong.
The ASX200 managed to rally +0.2% yesterday as strength across the broad market was enough to offset selling in the Resources Sector following the significant declines from the likes of copper and crude oil on Tuesday night. The market actually closed on its highs after reversing early losses as some bargain hunting entered previously weak pockets of the market although investors will need convincing that a recession isn’t imminent before we’re likely to enjoy some meaningful follow-through.
The Trade Desk (TTD US) has been a solid performer for the portfolio and despite a ~40% decline over the past year, the position is still showing a healthy ~20% paper profit – not many of those at the moment across high-value tech! Overnight the global advertising technology company announced a very interesting deal with Disney making it possible for brands…
