ASX 200 afternoon report: June 9, 2023

The ASX 200 trades 27 points (0.38%) higher at 7126, at 3.20 pm, on track to snap a three-day losing streak ahead of the June long weekend.

On Wall Street, regular service resumed overnight as the Nasdaq (+1.27%) outperformed the S&P 500 (0.62%) and the Dow Jones (0.5%), supported by a dip in US Treasury yields.

Specifically, a sharp rise in US jobless weekly claims (261k vs 233k prior), a sign that the labour market is cooling, saw the rates market reduce the probability of a rate hike at next week’s FOMC meeting to 25%. However, we think this underestimates the chances of a rate hike.

However, since the May meeting, five key hawkish developments have occurred.

1. The debt ceiling was raised before the X-date avoiding costly disruptions.
2. The impact of the banking crisis has been less meaningful than feared
3. Core PCE increased by 4.4% YoY from 4.2% previously
4. Non-farm payrolls increased by a robust 339k in May
5. Two early pausers, the RBA and the BoC, hiked rates this week

In our opinion, the net impact of the five developments above narrowly tips the scales in favour of a 25bp rate hike to 5.25% -5.5% before an extended pause.

Returning to matters closer to home, taking its lead from the Nasdaq, the ASX 200 technology sector outperformed today, rising 1.27%. Sezzle added 2.77% to $24.15, Xero added 1.7% to $108.38, Wisetech added 1.6% to $75.16, and Altium added 0.71% to $37.05.

Chatter around imminent China stimulus and a possible cut to the Reserve Requirement Ratio (RRR) has helped the price of iron ore rally over 5% this week to above $110.00. BHP added 1.18% today to $44.66, and Fortescue added 1.07% to$20.73. Mineral Resources added 0.72% to $69.66, and Rio Tinto added 0.67% to $114.77.

Despite this week’s hawkish RBA communique, bargain hunters have dipped their toes in the water to support some of the beaten-up retailing names. Adair’s gained 4.44% to $1.41, Myer Holdings added 2.44% to $0.63c, and Super Retail Group added 0.45% to $11.10. In contrast, Harvey Norman was trading lower at $3.22, down 4.17% this week and at its lowest level since May 2020.

The Financial sector has gained, led by ANZ, which added 0.93% to $22.89 after it announced today it would pass on the RBA’s 25bp rate hike to variable interest rate mortgage holders effective June 16. Westpac added 0.45% to $20.29, NAB added 0.44% to $25.27, and CBA gained 0.19% to $96.05.

ASX 200 technical analysis

The ASX 200 appears set to close uptrend support (7110ish) from the October 6411 low, above the 200-day ma (7115), and well above last week’s 7077 low. A sustained break below 7075 would be problematic and lead to a test of year-to-date lows at 6900.

The AUD/USD is trading at .6695 (-0.31%), slipping from a four-week high of .6718.

ASX 200 daily chart

1. TradingView: the figures stated are as of June 9, 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.