ASX 200 afternoon report: 26 October 2023

The ASX 200 trades 52 points (-0.76%) lower at 6802 at 2:45 pm AEDT.

Rapid shift in RBA rate expectations

The ASX 200 has today dived to its lowest level in 12 months after yesterday's hotter-than-expected local inflation print set up an RBA rate hike, following a challenging session on Wall Street overnight. Today's intraday low of 6777.4 was one point above the 6776 low it touched on the 28th of October 2022.

Two weeks ago, the Australian interest rate market was pricing in just a 5% chance of an RBA rate rise in November. Following yesterday's inflation update and a week of hawkish RBA communications, a 25bp rate rise on Melbourne Cup Day now appears a formality.

Tech stocks falter amidst rising bond yields

Hopes that yesterday's solid earnings report from Microsoft would offset Alphabet's disappointing cloud revenues and rising bond yields proved futile as the Nasdaq ended 2.47% lower overnight.

Today's market movement

Consumer-facing stocks

The prospect of higher mortgage payments for households already strained by cost-of-living pressures weighed on consumer-facing stocks.

• Myer Holdings: -4% to $0.48
• Aristocrat Leisure: -3.37% to $39.01
• Domino's Pizza: -2.82% to $49.95
• Kogan: -2.67% to $4.73

Banking sector

A similar story unfolded for the banks as higher interest rates led to an increased number of households falling behind on mortgage payments.

• Macquarie: -1.28% to $161.40
• Westpac: -1.18% to $20.55
• NAB: -0.60% to $28.16
• CBA: -0.55% to $96.82
• ANZ: -0.5% to $24.72

IT sector

ASX-listed IT stocks followed suit, led by Megaport, which plunged 19.8% to $9.22 after its quarterly update disappointed.

• Block (Afterpay's owner): -7.91% to $65.53
• Appen: -6.67% to $0.91
• Life360: -6.23% to $7.30

Health care sector

The much-maligned ASX 200 Health Care sector, just 3% above its COVID crash low, made a fresh 52-week low.

• Telix Pharmaceuticals: -3.58% to $8.62
• Pro Medicus: -2.22% to $75.60
• CSL: -2.28% to $233.04
• Ramsay Health Care: -1.09% to $48.91

Resource Sector

News that Chinese developer Country Garden Holdings had defaulted for the first time was not enough to offset the positive news that China's NPC had approved a mid-year expansion to its central budget for the first time since the Asian Financial Crisis in 1998.

• Rio Tinto: +0.7% to $117.08
• BHP: +0.42% to $44.92
• Fortescue: +0.16% to $22.05

ASX 200 technical analysis

In late September, we adopted a tactical bullish stance on the ASX 200 (just above 7000), aiming for a rebound towards the range (7440) highs and potentially the year-to-date highs (7567). However, after experiencing a third daily close below the 6900/6870 support zone yesterday, we have exited our bullish position and shifted to a neutral bias.

ASX 200 daily chart

• _{TradingView: the figures stated are as of 26 October 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.}