ASX 200 afternoon report: 10 October 2023

The ASX 200 trades 75 points (1.08%) higher at 7045 at 3:20 pm AEDT.

Fueling the ASX 200 rally: Wall Street optimism and dovish Fed sentiment

The Australian market's uptick was significantly influenced by a buoyant Wall Street session. Federal Reserve Vice Chair Jefferson joined the chorus of Fed officials who have cautiously acknowledged the upward trajectory of US Treasury yields over recent months—akin to the impact of three separate 25 basis point rate hikes from the Federal Reserve.

The market catalyst we've been waiting for: Middle East unrest and rising bond yields

Intriguingly, the spike in bond yields coupled with the unfolding geopolitical tensions in the Middle East seem to have served as the catalyst for the much-anticipated dovish shift from the Federal Reserve—a move that equity markets have been eagerly awaiting.

Investors and financial analysts would do well to keep a close eye on these market dynamics, as they offer valuable insights into investment opportunities and risk assessment in an ever-volatile global financial landscape.

Today's market movement

IT sector

A prospect eagerly latched onto by the interest rate-sensitive IT sector, which gained 3.24% for its best day in six weeks.

• Appen: +8.74% to $1.12
• Novonix: +6.87% to $0.70
• Life 360: +5.61% to $8.66
• Megaport: +4.57% to $11.68

Energy and resources sector

A major topic of conversation this week has been energy security and safety havens. Australia’s geographical isolation from current hotspots in Europe and the Middle East means the local index offers both.

• Coronado Coal: +2.78% to $1.76
• Mineral Resources: +2.69% to $61.05
• Whitehaven Coal: +2.21%
• New Hope Coal: +1.21% to $6.28
• Woodside: +1.22% to $35.96

Banking sector

The Westpac Consumer Confidence survey, released this morning, rose by 2.9% to 82, marking its highest level in six months, albeit still in deeply pessimistic territory. The NAB Business Confidence Index remained unchanged at 1. Encouragingly for the RBA, pricing intentions eased in the month following the spike that followed the award wage increases.

• Macquarie: +1.6% to $167.20
• CBA (Commonwealth Bank of Australia): +1% to $101.03
• ANZ (Australia and New Zealand Banking Group): +0.83% to $25.64
• NAB (National Australia Bank): +0.76% to $29.10

Lithium sector

Following downgrades last week by two US brokers, concerned about falling lithium prices, the buyers have come out of the woodwork today.

• Galan Lithium: +10% to $0.62c
• Core Lithium: +7.35% to $0.37c
• Pilbara Minerals: +5.9% to $3.95
• Vulcan Energy: +4.91% to $2.78

ASX 200 technical analysis

Last week, we shifted to a tactical bullish stance on the ASX 200, eyeing the index's rebound potential as it hovers just above the 7000 mark. Our analysis points to the possibility of ascending toward range highs of 7440 and even breaking through to year-to-date peaks at 7567. The stop-loss threshold for this bullish outlook is set at a sustained close below the 6900/70 zone.

It's crucial to highlight that if the ASX 200 experiences a sustained close below the 6900/70 region, downside risks could push the index toward testing the 6750 level, eventually trickling down to 2022 lows at 6400.

While today's robust rally adds credence to our bullish tactical projection for the ASX 200, it's imperative to bear in mind the unpredictable nature of the ongoing conflict in the Middle East. This geopolitical unrest presents multiple possible trajectories, including the two scenarios we delineated in our previous analysis.

In the first potential outcome, the conflict remains geographically contained within existing borders. In the second, a regional escalation ensues, carrying not only a devastating humanitarian toll but also exerting profound impacts on a diverse range of asset classes.

For traders and financial analysts, keeping an eagle eye on these geopolitical variables is key for accurate risk assessment and investment strategy adaptation in a volatile global market landscape.

ASX 200 daily chart

• _{TradingView: the figures stated are as of October 10, 2023. 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.}