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The selling picks up the pace: Data drives the weakness

Here’s today’s The Match Out report from Market Matters’ James Gerrish. Key point: the S&P/ASX 200 (INDEXASX: XJO) finished down -1.81% to 7,612.

Markets @ MiddayListen here at lunchtime or find all Market Matters Podcasts on Spotify.

The local market is now on a 4-day losing streak – its worst run since January (5 sessions) – with today being the worst of the batch.

As we said this morning, US stocks are leading the weakness, having fallen for six consecutive days; their worst losing streak since June.

Equities were on the back foot early following a soft session overnight, stemming from strong-than-expected retail sales numbers, which put pressure on rate cut expectations.

Early buyers were hurt today with the market not “feeling right all day”, come the close, 92% of the ASX 200 finished down, and not surprisingly, all sectors finished lower today, though there was some relief late in the session as the index closed 27pts / 0.35% off the lows.

  • The ASX 200 fell -140ts/ -1.81% to 7612
  • Communications (-1.03%) was best on ground today, but hard to call that a positive.
  • Consumer Discretionary (-2.39%) was the hardest hit, followed by Utilities (-2.15%), Materials (2.15%), Real Estate (-1.93%) and Financials (-1.92%)
  • US Retail Sales numbers at +0.7% in March were far better than the 0.3% expected, while the prior month was revised higher as well. A strong consumer is working against a Fed that was keen on getting at least one cut before the election late this year.
  • Interest rate markets are now only pricing in a 50% chance of a Fed cut in July, down from a near 100% chance just a week ago. Locally we have seen a 140% chance of a cut priced in by the December meeting now pegged back to a 99% chance.
  • China data out today also weighed on our market. GDP was better than expected at 5.3% YoY for Q1, though Retail Sales and Industrial Production both came in below expectations. Ultimately, the market took a negative view of the news.
  • Zip Co Ltd (ASX: ZIP) -10.9% tumbled despite a strong 3Q update today. We will cover this in the Morning Report tomorrow.
  • Hub24 Ltd (ASX: HUB) -2.09% was soft despite record FUA in flows with the total number now hitting $100b thanks to flows and market performance. Like Netwealth Group Ltd (ASX: NWL) though, they flagged softening revenue margins given low cash balances and sliding fee schedules.
  • Macmahon Holdings Ltd (ASX: MAH) -4.08% bid for Decmil Group Limited (ASX: DCG) at a huge 76.5% premium to yesterday’s close, all cash. This is a good read-through for the valuation of SRG Global Ltd (ASX: SRG) that we hold in the Emerging Companies Portfolio.
  • Gold held last night’s gains today, trading around $US2,385/oz at our close.
  • Iron Ore performed reasonably well, only dropping -0.12% in Asian trade.
  • Stocks in Asia were also hard hit. The best seen in China, down -0.95%, while Hong Kong and Japan both fell ~1.9%.
  • US Futures are all down around -0.15% – no major move here despite the weakness across our region.



Broker Moves

  • WiseTech Global Ltd (ASX: WTC) Raised to Positive at Evans & Partners Pty Ltd
  • DroneShield Ltd (ASX: DRO) Cut to Hold at Bell Potter; PT A$1
  • Star Entertainment Group Ltd (ASX: SGR) Cut to Underperform at Jefferies

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*Active Income Portfolio FY 23 of 15.36% achieved between 01/07/22 to 30/06/23.

At the time of publishing, the author or their clients may have a financial interest in some of companies or securities mentioned.

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