ASX200 Afternoon Report August 3rd 2022

The ASX200 trades 24 points lower at 6973 at 3.20 pm Sydney time.

The ASX200 has pared early losses after a quickfire 80-point plunge shortly after the open, sparking memories of the selloff in June.

The weaker session follows losses on Wall Street, and a round of hawkish comments from Fed officials, in response to a dramatic easing in Financial Conditions that followed last week's FOMC meeting.

Financial Conditions consist of stock prices, credit spreads, the U.S dollar and interest rates, all of which have gone the wrong way for the Fed in recent days as it attempts to clamp down on inflation at multi-decade highs.

In that respect, the fall in U.S 10-year yields from 3.5% to 2.5% over the past six weeks is likely done for now. Stock markets will be forced to reacquaint themselves with the headwinds of higher yields and a stronger U.S dollar in the sessions ahead.

This accounts for the fall today in the Consumer Discretionary Sector, led lower by Domino's Pizza which fell 3.3% to $71.44, Star Entertainment fell 2.6% to $3.01, Aristocrat Leisure fell 2% to $34.62, and Wesfarmers fell 1.5% to $46.86.

Falls also for the Financial Sector. Westpac fell 1.45% to $21.68, CBA fell 1.34% to $100.52, NAB fell 0.9% to $30.68, ANZ fell 0.66% to $22.66, while Macquarie fell 1.25% to $176.58.

The energy sector has edged lower ahead of this week's OPEC+ meeting, which is likely to disappoint as producers cast a nervous glance toward global recession risks. Santos fell 1.86% to $7.11; Woodside Energy fell 0.77% to $32.43. Beach Energy bucked the trend rising by 0.56% to $1.81.

The IT Sector has been the day's outperformer as it added 2%, helped by the continued renaissance of the BNPL sector. Zip surged 10.25% to $1.35, Sezzle added 6% to $1.13, EML Payments climbed 6.5% to $1.07, Tyro Payments added 7% to $0.83c and Megaport added 5.5% to $8.66.

The Materials sector has gained led by Lynas Rare Earths, which added 7.31% to $9.53. Mineral Resources added 3.9% to $55.16, South 32 added 1.6% to $3.80, FMG added 0.8% to $18.04, and BHP gained 0.13% to $38.63.

Lithium stocks have continued their rebound, led by Lake Resources, which added 8% to $0.87c. Galan Lithium added 6.17% to $1.21, Vulcan Energy added 3.9% to $7.44, and Core Lithium added 2.9% to $1.16.

In theory, the ASX200's second consecutive daily close above 6960 negates the technical damage caused by the selloff in June. However, as the rally in U.S equity markets appears close to completion, we will hold off for the time being on moving to a more positive bias for the local bourse.

Source Tradingview. The figures stated are as of August 3rd, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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The ASX200 trades 24 points lower at 6973 at 3.20 pm Sydney time. 

The ASX200 has pared early losses after a quickfire 80-point plunge shortly after the open, sparking memories of the selloff in June.

The weaker session follows losses on Wall Street, and a round of hawkish comments from Fed officials, in response to a dramatic easing in Financial Conditions that followed last week's FOMC meeting.

Financial Conditions consist of stock prices, credit spreads, the U.S dollar and interest rates, all of which have gone the wrong way for the Fed in recent days as it attempts to clamp down on inflation at multi-decade highs.

In that respect, the fall in U.S 10-year yields from 3.5% to 2.5% over the past six weeks is likely done for now. Stock markets will be forced to reacquaint themselves with the headwinds of higher yields and a stronger U.S dollar in the sessions ahead.

This accounts for the fall today in the Consumer Discretionary Sector, led lower by Domino's Pizza which fell 3.3% to $71.44, Star Entertainment fell 2.6% to $3.01, Aristocrat Leisure fell 2% to $34.62, and Wesfarmers fell 1.5% to $46.86.

Falls also for the Financial Sector. Westpac fell 1.45% to $21.68, CBA fell 1.34% to $100.52, NAB fell 0.9% to $30.68, ANZ fell 0.66% to $22.66, while Macquarie fell 1.25% to $176.58. 

The energy sector has edged lower ahead of this week's OPEC+ meeting, which is likely to disappoint as producers cast a nervous glance toward global recession risks. Santos fell 1.86% to $7.11; Woodside Energy fell 0.77% to $32.43. Beach Energy bucked the trend rising by 0.56% to $1.81.

The IT Sector has been the day's outperformer as it added 2%, helped by the continued renaissance of the BNPL sector. Zip surged 10.25% to $1.35, Sezzle added 6% to $1.13, EML Payments climbed 6.5% to $1.07, Tyro Payments added 7% to $0.83c and Megaport added 5.5% to $8.66.

The Materials sector has gained led by Lynas Rare Earths, which added 7.31% to $9.53. Mineral Resources added 3.9% to $55.16, South 32 added 1.6% to $3.80, FMG added 0.8% to $18.04, and BHP gained 0.13% to $38.63.

Lithium stocks have continued their rebound, led by Lake Resources, which added 8% to $0.87c. Galan Lithium added 6.17% to $1.21, Vulcan Energy added 3.9% to $7.44, and Core Lithium added 2.9% to $1.16.

In theory, the ASX200's second consecutive daily close above 6960 negates the technical damage caused by the selloff in June. However, as the rally in U.S equity markets appears close to completion, we will hold off for the time being on moving to a more positive bias for the local bourse.

 

Source Tradingview. The figures stated are as of August 3rd, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

1. Open a Forex.com account, or log in if you’re already a customer.
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3. Choose your position and size, and your stop and limit levels.
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