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ASX 200 afternoon report: 30 May 2024

The ASX200 trades 36 points (-0.47%) lower at 7629 at 2.45 pm AEST.

With just one trading day left before the month’s end, the ASX 200 is on track for its second consecutive monthly decline after falling in seven of the eight past sessions. The ASX 200’s falls this week accelerated following the release of a hotter-than-expected Australian inflation print (3.6% year-on-year (YoY) vs 3.4% expected).

The firmer inflation number has raised significant questions about the pace and sustainability of inflations decline towards the RBA’s target in “a timeframe” consistent with the RBA’s strategy. This uncertainty has been felt in the Australian interest rate market, which is now pricing in a 20% chance of a 25bp RBA rate hike before year-end after starting the week pricing in a 20% chance of an RBA rate cut.

This week, the deepening rout in the US bond market has aided the yo-yo-ing in RBA expectations. However, if next week’s Q1 2024 AU GDP is more tepid than expected, a rate cut might soon be back on the agenda. The preliminary expectation is for GDP to increase by 0.3% quarter-on-quarter (QoQ) for an annual rate of 1.2%. This aligns with the RBA’s revised forecasts in the May Statement of Monetary Policy.

Returning to equity markets, when the pendulum swings it is often without warning.

This time last week, the market was under the spell of super stock NVIDIA, wondering how high its thumping earnings report might carry equity markets. This week, the market has fallen under the spell of the bond market genie and higher yields. The focus has turned to protecting P&L into month end along with managing the downside risks should we see firmer than expected US or European inflation data tomorrow evening.

Mining sector

  • Fortescue: – 3.05% to $24.79
  • Mineral Resources: – 2.47% to $71.85
  • Rio Tinto: – 1.48% to $127.73
  • BHP: -1.5% to $44.41 after it walked away from its $74 billion takeover bid for Anglo American. While it’s a missed opportunity for the Big Australian, shareholders will be relieved that management stuck to its guns and didn’t overpay for the prize it so dearly wanted.

Energy sector

The Energy sector has fallen on concerns that surging US yields will slow economic growth and crimp oil demand.

  • Santos: -1.51% to $7.51
  • Woodside: – 1.20% to $27.14,
  • Beach Energy: – 1.04% to $1.66
  • AGL Energy: – 0.73% to $10.24.

Banking sector

The big banks are trading lower as higher yields impact funding costs and crimp demand for credit.

  • Macquarie: – 0.76% to $188.05
  • NAB: – 0.33% to $33.54
  • ANZ: – 0.22% to $27.81
  • Westpac: – 0.23% to $25.95

ASX 200 technical analysis

The ASX 200 spent a large chunk of May spinning its wheels below resistance at 7910 (from the early April high) and above a strong band of support 7720/00 area. Yesterday’s break and close below support at 7720/00 indicates the ASX 200 has carved out a double top at 7900/10. This is a possibility we have flagged in recent weeks and warns that a deeper pullback is underway towards 7500/7400. The ASX 200 needs to see a prompt and sustained rebound back above 7720ish to negate the downside risks.

ASX 200 daily chart

  • Source: TradingView. The figures stated are as of 30 May 2024. 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.

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