ASX 200 afternoon report: 16th of January 2023

2023 is the Year of the Rabbit in the China Zodiac - fitting that the rebound in the ASX 200 in the first weeks of this year has stemmed from optimism around China’s re-opening and as the Federal Reserve appears on the verge of pulling a rabbit out of the hat.

After 425bp of rate hikes in just seven months, cooling US inflation is expected to see the Federal Reserve downshift the pace of its rate-hiking cycle at the February FOMC meeting bringing relief to markets.

More so as the tightening cycle appears to have been without serious pain to US consumers.

On Friday night, the University of Michigan Consumer sentiment index rose to 64.6 in January, trouncing market expectations for a modest rise to 60.5 in January.

IT sector

Returning to the local market, the IT sector outperformed after the tech-heavy Nasdaq added 5.5% last week.

• BNPL stock ZIP added 9.84% to 0.67c
• Life360 added 9.5% to $5.88
• Tyro Payments added 7.3% to $1.47
• Megaport added 7.46% to $7.35.

Energy sector

An 8.27% rebound in the price of crude oil last week to above $80 p/b has supported energy stocks.

• Cooper Energy added 5.26% to $0.20c
• Viva Energy climbed 2.23% to $2.75
• Woodside Energy added 2.03% to $37.44
• Strike Energy added 2.03% to $0.38c

Financial sector

At a sector level, the ASX Financial Sector added 2.79% last week but remains 5% below its all-time high. After the majority of Wall Street banks that reported last week beat earnings estimates, further upside in the ASX Financial sector seems likely.

• ANZ added 1.45% to $24.85
• NAB added 1.26% to $31.70
• Macquarie added 1% to $180.06
• CBA added 0.85% to $107.43, seemingly locked and loaded to test its all-time $110.19 high.

For more on the banks, please read today's Three Stocks to Watch article.

News that China’s National Development and Reform Commission will crack down on spreading false information and price gouging in the iron ore market has weighed on the price of iron ore futures and Fortescue Metals, which fell 2.61% to $22.21. BHP traded to a new high at $50.00 before easing to be trading flat on the day at $49.63. Rio Tinto fell 0.22% to $122.02.

Apart from the silly sell-off on Day 1 of the New Year, which was flagged at the time as likely a false break lower, the ASX 200 has followed the road map nicely to test and break above the December 7375 high. The preference now is to look to trim longs into fresh highs, ideally between 7480 and 7600.

The AUD/USD is trading higher at .7010, its first time above .70c in four months. Today's break of resistance at .6890/00 should see the V push towards the mid-August .7137 high.

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