ASX 200 afternoon report: April 13, 2023

The ASX 200 trades 30 points lower (-0.40%) at 7314 at 3.00pm AEST.

The ASX 200’s rousing run of ten days of gains in the past eleven looks set to end today after hotter-than-expected jobs data bought the RBA’s May meeting back into play. Furthermore, the FOMC meeting minutes noted that the banking crisis would likely send the US economy into recession.

The sombre tone of the FOMC minutes saw Wall Street erase the early gains that followed reports that headline CPI in the US rose by 0.1% in March, taking the year-on-year rate from 6% to 5% - the lowest rate of inflation since May 2021.

While US economic data in recent weeks have shown signs of moderation and raised hopes that the Federal Reserve may be close to ending its rate-hiking cycle, today’s Australian employment data brings the RBA’s May Board meeting back into play.

Employment increased by 53k in March, exceeding expectations for a gain of 20k. The unemployment rate remained at 3.5%, stronger than consensus expectations for an increase to 3.6%. The participation rate rose to 66.7% in March from 66.6% in February.

The RBA paused its rate hiking cycle earlier this month to assess the lagged impact of its ten rate hikes on the labour market and inflation. Today’s red-hot labour data puts the focus squarely on the release of Q1 23 inflation data released on April 26. If it shows similar strength, it may see the RBA resume its rate hiking cycle as early as May.

A thought that saw consumer-facing stocks slump. Domino’s Pizza fell 3.19% to $51.31, Coles Group fell 2.42% to $18.17, Myer Holdings fell 1.71% Aristocrat Leisure fell 1.5% to $37.25. A similar story for the banks as CBA fell 0.8% to $98.44, Bank of Queensland fell 0.4% to $6.47, and Macquarie fell 0.37% to $179. ANZ bucked the trend as it rose 0.75% to $23.79.

A mixed day for mining stocks as Fortescue Metals fell 1.93% to $22.11, BHP Group fell 0.83% to $46.45, and Rio Tinto fell 0.53% to $121.10. Whitehaven added 3.2% to $6.95, erasing all of yesterday’s fall and more after it cut guidance.

A lift in the oil price overnight to above $83.00, buoyed by OPEC’s decision to cut supply and inline US inflation data, which raises expectations that the Fed’s tightening cycle is nearing an end boosting local oil stocks. Woodside Energy added 0.73% to $34.41, and Santos added 0.62% to $7.27. Beach Energy traded flat despite reporting lower sales volumes and revenue.

ASX 200 technical analysis

After holding support at 6900, the ASX 200 yesterday reached the 7350 targets we first pinpointed on March 28th here for a gain of ~4.5% in just nine trading sessions. The month of April (at least in the first half) has again lived up to its reputation as one of the best months of the year for the ASX 200 where the average gain in April over the past ten years has been +2.65%.

While we wouldn’t rule out further gains for the ASX 200 into the end of April, particularly if the 7350/70 resistance band breaks, keep in mind that May and June are seasonally associated with negative performance, which typically sees a pullback in the vicinity of 3-5%.

ASX 200 daily chart

1. TradingView: the figures stated are as of April 13th, 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