The Match Out: ASX sinks 3.5%, Bounced from key technical support but keep turning up!

James Gerrish

Market Matters

I have a few sayings written on my desk at work and at home, probably the most useful is simply ‘keep turning up'. By that I mean to continue to do the work, don’t get too emotional about the market, and continue to invest which is exactly what we should be doing in times like this. 

Sell-offs pass and it’s the long game that we should all be focussed on. Today’s move was a big one on the downside, particularly this morning with the ASX keying off two bearish sessions in the US to fall ~5%. 

Nearly everything was sold off with the main difference from recent trends being the Energy & Materials stocks also joined in – there were very few places to hide. By the close, there had been some recovery with the ASX 200 enjoying some dip buying and rallying 120 points from the lows of around 10.30 am, finding support at a key technical juncture.

  • The ASX 200 finished down -245pts/-3.55% at 6686, we wrote this morning that Technical support comes in at 6600 and we believe it might surprise many and hold, at least short-term!
  • The classic defensive sectors did the best today, Communications topped the board from a relative sense (-1.71%) followed by Utilities (-1.81%) & Staples (-1.93%).
  • Energy (-4.88%) and IT (-4.45%) felt the brunt.
  • Bitcoin had a very volatile session – was down 10% early on before being flat, now down 2% at 4:30pm.
  • Bond yields in the US were sharply higher on Friday – the 2 & 10 years inverted briefly which amplified the calls of a looming US recession.
  • Yields were also sharply higher in Australia today, 10 years +0.28% to 3.95% while the 3 years were +0.33% to 3.45%. The 3 years were sub 1% 6 months ago to give some context on the move.
  • Futures markets are now pricing an RBA cash rate of 3.63% by December. We thought the pricing was aggressive at 3%, which has now been blown out of the water.
  • Governor Lowe will be on the ABC tonight at 7:30pm a week after raising rates by 50bps.
  • The calls are now growing for the US Fed to rip the band-aid off and just hike rates by a more aggressive 75bps versus 50bps expected – some are even calling for 100bps. We tend to think the market would appreciate more definitive action on inflation.
  • Stocks that caught my eye across the MM Portfolio’s today for being relative performers included Resmed (RMD) +0.20%, Newcrest (NCM) -0.85%, Woolworths (WOW) -1.46%, Stockland (SGP) -0.55% & Telstra (TLS) -1.32%.
  • We’ll dig more into portfolio positioning in tomorrow’s portfolio report.
  • Lynas (LYC) -0.47% said they had secured a $US120m contract to build a processing facility in the US.
  • Iron Ore stocks under pressure today – Iron Ore down ~US$10 since we closed on Friday, Fortescue (FMG) -8.48%
  • Gold was higher settling ~US$1830
  • Asian stocks also recovered from early weakness, Hong Kong up +0.35%, Japan down -0.67% while China was up +0.81%
  • US Futures are all up between 1% (Dow) & 1.64% (Nasdaq)

ASX 200

For the first time in a long time, we've put in the intraday chart instead of the daily chart. Today was special - just for all the wrong reasons.

Lynas Rare Earths (LYC) $8.53

LYC -0.47%: the rare earth minerals business announced they had secured a $US120m contract to build a processing facility in the US in partnership with the US Department of Defence. The deal fully funds the construction of the facility that provides the US with access to a supply of the critical minerals essential for manufacturing a range of military tools as well as electric vehicles and wind turbines. The market is currently dominated by Chinese suppliers which heightens the risk of supply disruptions at critical times. The refinery is expected to be built in Texas and be operational by 2025.

Broker Moves

  • Pacific Smiles Raised to Positive at Evans & Partners
  • JB Hi-Fi Cut to Underperform at Macquarie; PT $40.90

Major Movers Today

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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