The Match Out: ASX sinks 1.5%, Energy & Materials whacked, Futures say ‘no more rate hikes’!

A tough day at the office with the ASX down ~1.5%, the only silver lining was the index finished more than +50pts up from the session low hit at 11 am following news that Credit Suisse had tapped the Swiss National Bank for up US$54b, with the hope of containing the issues. While positive, there’s still a lot to play out here and the volatility we’re seeing in bond markets is clearly a concern, while fears around the impact on global growth knocked commodities for 6!

• The ASX 200 finished down -103pts/ -1.46% at 6965
• The defensive sectors did best, Healthcare (+1.49%) & Communications (+0.37%) the only sectors to finish higher.
• Energy (-4.77%) & Materials (-3.21%) both whacked as growth fears re surfaced & safe haven buying of the $US played out.
• The local unemployment rate declined, printing 3.5% down from 3.7% in January and below the 3.6% expected.
• ANZ still hanging their hat on 2 more rate hikes, saying “We believe this data supports the RBA increasing interest rates by 25bp in April and May, bringing the terminal rate to 4.1% (ie no change to our RBA view).
• That is well above wherthe market is currently positioned as shown in the chart below – no further hikes are priced in by Futures.
• Oil rose during Asian trade from its lowest close in 15 months after a three-day rout – still, the sector was hardest hit on the market today.
• Fonterra (ASX: FSF) +9.93% rallied as profits came in ahead of expectations and they upped guidance – a rare winner.
• Commonwealth Bank (ASX: CBA) -0.10% outperformed the broader sector – always the case when things get volatile, the cream rises to the top. Jefferies out with a bullish note today saying…. It could be a beneficiary of “sectoral household deposit instability + it has a superior organic capital generation profile!!!
• IPH -10.61% suffered after a cyber-attack. Medibank (MPL) shows the share prices reactions can be short-lived
• Coronado (ASX: CRN) -7% fell on news that China would cut Steel output – Bowen Coking Coal (ASX: BCB) -7.02% also lower on the news.
• Iron Ore fell, down around ~2% in Asia. Gold was steady at ~US$1919.
• Asian stocks were down Hong Kong fell -1.48%, Japan -1.33% while China was off -0.67%
• US Futures are all up, around +0.40%  

ASX 200 Chart - Intraday

ASX 200 Chart - Daily

Interest Rates – No more priced in

There’s been a huge shift this week in the market’s pricing of future interest rates as a result of the banking issues in the US and Europe. We now have no more rate hikes priced in, and rate cuts now on the table as the year progresses. Whilst we were of the opinion that bond markets were too hawkish on rates, and we’d see one and done in April taking the cash rate to 3.85%, that now seems too hawkish.

Cash Rates Futures Australia - Source Bloomberg

Broker Moves

• South32 Rated New Neutral at Nedbank CIB; PT A$4.93
• Breville Rated New Sector Perform at RBC; PT A$21
• Pro Medicus Raised to Hold at Bell Potter; PT A$59

Major Movers Today

Have a great night

The Market Matters Team

Make informed investment decisions

At Market Matters, we write a straight-talking, concise, twice daily note about our experiences, the stocks we like, the stocks we don’t, the themes that you should be across and the risks as we see them. Click here for your free trial.

The Match Out will be available each day after the market close. Follow my profile to be notified when the latest report is live.