ASX 200 afternoon report: July 20, 2023

The ASX 200 trades 8 points (0.10%) higher at 7331 at 3.10 pm AEST.

Q2 2023 earnings: Market reaction to Tesla and Netflix

After the market closed this morning, Tesla and Netflix reported Q2 2023 earnings that were met with a disappointing reception. Both experienced "buy the rumour and sell the fact" type reactions. Here are the details:

Tesla

• Reported EPS: $0.91 (expected: $0.82)
• Reported Revenue: $24.9B (expected: $24.7B)
• Resulting share price movement: Fell 4.2% in after-hours trading to $279.07

Netflix

• Reported EPS: $3.29 (expected: $2.86)
• Reported Revenue: $8.19B (expected: $8.29B)
• Resulting share price movement: Fell 8.92% to $435.94

Unyielding strength in the Australian labour market

The release of hotter-than-expected Australian jobs data, which has increased the chance of an RBA rate hike next month, has slammed headlong into the ASX 200 market this morning, on the verge of a definitive break higher.

Confounding those looking for signs of cooling, the Australian labour market added 32k jobs in June vs 15k expected, and the unemployment rate was unchanged at 3.5% vs 3.6% expected.

RBA decisions and market anticipation

Earlier this week, the RBA Meeting Minutes put the focus firmly on incoming data, including today's labour data and next Wednesday's inflation data, ahead of the RBA's August Board meeting.

"The Board would have the benefit of additional data on inflation, the global economy, the labour market and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks."

With the unemployment rate edging back towards a 50-year low, despite a record 400 bp of rate hikes, there is absolutely no room for an upside surprise in next Wednesday's Q2 CPI data, particularly given the RBA's stated concerns around wage growth and inflation.

The ASX 200's misstep

The timing of the data release could not have come at a more inopportune moment for the ASX 200. The index was testing the top of its three-month range before it encountered a rapid-fire 40-point (0.58%) fall from 7383 to 7339 - a fall it was unable to recover from.

Despite the failure of the ASX 200 in its latest attempt to break higher, there was no stopping the ASX 200 Financial sector, which gained 0.6% for an eighth day of gains.

Financial sector

Expectations that the Fed is nearing the end of its hiking cycle have led to a surge in the ASX200 Financial sector to its highest level in five months, better-than-expected US bank earnings and buying ahead of dividend season also fueling the rise:

• Macquarie Group added 1.7% to $185.58
• CBA added .09% to $105.52
• Westpac, ANZ, and NAB traded flat on the day

Mining sector

Today saw gains for the big miners, led by Mineral Resources which added 6.1% to $76.47 after agreeing to sell its stake in the Kemerton lithium hydroxide refinery to partner Albermarle.

• Fortescue added 1.30% to $22.59, eyeing the crucial $23.00 resistance level
• Rio Tinto added 0.78% to $116.92
• BHP Group added 0.36% to $44.83

IT sector

Despite overall volatility, the local IT sector made gains, led by EML Payments.

• EML Payments added 4.73% to $0.89c
• Megaport added 4.21% to $10.16
• ZIP added 3.45% to $0.45c

Gold sector

The price of gold today surged above $1985 for the first time in two months, but this wasn't enough to curb declines in Northern Star, extending falls after giving softer guidance yesterday for FY24

• Northern Star dived 6.2% to $11.81
• Regis Resources fell 1.6% to $2.16
• Perseus Mining added 1.81% to $1.83

ASX 200 technical analysis

The rebound in the ASX 200 following the V-shaped bottom at the 6998 low has all but reached our objective, range highs 7360/90 area. A sustained break above 7360/90 is needed to open up a test of year-to-date highs at 7567. Until this occurs, allow another rotation within the range towards the 200-day moving average at 7170.

ASX 200 daily chart

• _{TradingView: the figures stated are as of July 20, 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.}