ASX Live | ASX Recovers Slightly; Mixed Retail Data in US Weighs Wall St, Bitcoin Plunges and Aussie Dollar Struggles

Here’s the latest video where we talk everything China and ask, do Aussie investors have anything to fret about?

You’ll have to watch the full episode, but Greg did warn that the iron ore miners could see a downgrade cycle from here.

We then discussed the overall market, pointing out that when valuations are stretched, it doesn’t take much for things to snap.

We ended with advice from Warren Buffett — the stock market is a device for transferring money from the impatient to the patient.

The July jobs data shows that the Australian labour market is still tight, but it is starting to drop.

The unemployment rate rose from 3.4% to 3.7%, and the pace of job growth slowed. The RBA’s Jobs Leading Indicator and rising applications per vacancy also point to a further slowdown in the labour market.

This further adds fuel to the notion that the RBA has done enough and the peak of interest rates has been seen for this cycle.

The July jobs data shows the Aust jobs mkt is still tight but with unemp rising from 3.4% to 3.7% & a slowing trend in jobs grth its cooling. Our Jobs Leading Indicator & rising applications per vacancy point to a further slowing. This is all consistent with RBA staying on hold pic.twitter.com/WYdeAWsQSq

— Shane Oliver (@ShaneOliverAMP) August 17, 2023

The stock market concluded Friday’s trading session on a relatively flat note, up +0.03% at 7,148.1, capping off the benchmark’s most challenging week in nearly a year with a sense of unease.

The index finished the week with a decline of 2.84%, marking its most substantial weekly downturn since September.

Among the sectors, the real estate industry exhibited the most robust performance, spearheaded by Goodman Group’s notable rise of 7.3%.

The utilities sector also showed some resilience, registering a 1.2% increase, with Origin Energy and Meridian Energy notching gains of 1.8% and 2.9%.

However, the communications sector exerted downward pressure on the benchmark, experiencing a decline of 1.9%. Telstra witnessed a 2.8% drop, while TPG faced a 3.1% reduction.

Imugene emerged as the week’s underperformer, plummeting by 16%. This decline followed the company’s completion of a $35 million share placement and the launch of a $30 million share purchase plan.

Conversely, Magellan Financial Group emerged as a standout, recording a significant surge of 13.2%. In its latest annual report, the international equities manager declared a special dividend of 30¢.

ASX 200 Sector Top Performance

• Real Estate up +1.68%
• Utilities up +1.16%
• Materials up +0.80%

ASX 200 Sector Worst Performance

• Telecomunication down -1.89%
• Discretionary down -0.97%
• Staples down -0.46%

The best individual performers:

• Magellan Financial Group [ASX:MFG], up 13.59%
• Goodman Group [ASX:GMG], up 7.09%
• Amcor Plc [ASX:AMC], up 5.36%
• Cochlear Ltd [ASX:COH], up 4.48%
• Netwealth Group [ASX:NWL], up 4.28%

The worst individual performers:

• Super Retail Group [ASX:SUL], down 6.41%
• Growthpoint Properties Australia [ASX:GOZ], down 5.53%
• Domain Holdings Australia [ASX:DHG], down 4.26%
• PSC Insurance Group [ASX:PSI], down 3.70%
• Domino’s PIZZA Enterprises [ASX:DMP], down 3.49%

All figures shown are from 4:29pm AEST

The stock market has a long history of seasonal patterns. Some months are typically stronger than others, and August is one of the weakest.

Over the past 10 years, the S&P 500 has averaged a gain of just 0.1% in August. This is compared to an average gain of 1.5% for the entire year.

There are a few reasons why August is typically a weak month for equities. One reason is that it is a time when many investors are on vacation and not paying as close attention to the markets. This can lead to increased volatility and more pronounced sell-offs.

Another reason for August’s poor performance is that it is a time when many companies report their quarterly earnings. This can lead to disappointment if earnings come in below expectations, which can weigh on the stock market.

Finally, August is also a time when there are a number of important economic data releases, such as the employment report and the GDP report. These releases can also cause volatility in the markets, as investors react to the latest economic news.

Of course, there are always exceptions to the rule. In 2020, for example, the S&P 500 gained 10.8% in August, as investors piled into stocks during the COVID-19 pandemic.

However, for the most part, August is a month when investors should be cautious.

According to seasonality, markets dip in August then rip in September.

Are you leaning bullish or bearish heading into next month? pic.twitter.com/WtKFKfddLu

— Stocktwits (@Stocktwits) August 17, 2023

Fellow reporter Ryan Clarkson-Ledward has kept a close eye on the background geopolitics of the US dollar. In his eyes, big structural shifts are around the corner.

As he puts it:

‘[A] cohort of developing nations is set to meet next week and aims to formalise a new currency agreement that doesn’t involve USD.

It won’t be an easy transition if they decide to make it happen.

But it also isn’t the only push away from the dollar that we’re seeing.

Back in 2018, China made its first bold move to dethrone the reign of the petrodollar. The undertaking was slow at first, but the rise of a counter petro-yuan has been steady.

As for whether it will ever replace the petrodollar, it is hard to say. Because while I’m sure China would love that, I doubt the rest of the world is looking to replace one financial weapon for another.

Instead, expect to see more countries moving away from both!’

Read more below:

https://www.moneymorning.com.au/20230818/another-nail-in-the-petrodollars-coffin.html

Oil is set to record its first weekly loss since June due to concerns about China’s economic weakness and the potential for stricter monetary policies in the US overshadowed indications of a tighter oil market.

West Texas Intermediate is approaching $80 per barrel, on track for its fourth decline in five sessions.

Crude oil’s value has decreased by over 3% this week, primarily due to unfavourable economic data from China.

This decline has outweighed signs of a tighter market, with US oil reserves reaching their lowest level since January.

In the United States, the Fed’s minutes hinted at the possibility of further interest rate hikes to control inflation.

This stance has contributed to higher US Treasury yields and a stronger dollar.

The US currency is headed for its fifth consecutive weekly gain, marking its longest winning streak in over a year. This trend diminishes the attractiveness of commodities to international buyers.

Despite this recent dip, crude oil remains significantly higher compared to its June lows.

This upward movement has been driven largely by supply reductions implemented by key OPEC+ members Saudi Arabia and Russia.

ASX recovers lost ground and sits up 0.19% at 7,159.3 this afternoon as the Real Estate sector leads the charge.

The real estate sector has been on a tear in recent months, thanks to strong demand for property. The sector is now up 20% year-to-date.

Other sectors that performed well on Friday included utilities (+1.4%), basic materials (+1.1%), and healthcare (+0.4%).

On the other hand, technology stocks fell 1%, while consumer cyclical and industrials both declined 0.9%.

The top movers so far were:

Magellan Financial (+19.7%)
Abacus Property (+11.6%)
Goodman Group (+7.9%)
Inghams (+5.5%)
Core Lithium (+5.5%)

The biggest losers were:

Imugene (-13.3%)
Domain (-6.7%)
Centuria Capital (-5.3%)
Super Retail Group (-5.1%)
Growthpoint Properties (-3.9%)

China’s second-largest real estate firm, China Evergrande Group, has lodged a Chapter 15 bankruptcy protection request in the United States, as revealed in legal documents submitted in New York.

The beleaguered property giant opted to postpone its engagements with certain creditors earlier this week, affording them additional time to deliberate on its most recent reorganization blueprint.

Evergrande has rescheduled its interactions with creditors to reconvene on August 28, during which it will deliberate on a proposed $US3.2 billion debt reduction and survival strategy.

Amidst the property sector’s debt turmoil that unfurled in the middle of 2021, 40% of China’s residential property sales entities have defaulted, with the majority being privately owned real estate developers.

Trading in Evergrande’s shares came to a halt on March 21 last year. The company had assets worth around $2 billion.

Chapter 15 bankruptcy safeguards a company’s holdings within the United States while it negotiates restructuring agreements in other jurisdictions.

These unfolding events concerning Evergrande have emerged in the wake of the imminent default of the Chinese property enterprise Country Garden.

The default is another warning that China’s three-headed monster – demand, debt and demographics – will continue to weigh over markets for a long time yet.

Over $1 billion in crypto market liquidations overnight as Bitcoin unexpectedly drops 7%, a 2-month low.

In previous weeks, market volatility in bitcoin had been at an almost 5-year low, signalling a big move was imminent.

Overnight we saw a big wipeout as negative market sentiment moved into the crypto space.

XRP led the losses after a U.S judge granted the U.S Securities and Exchange Commission (SEC) approval to file a motion to appeal the recent favourable ruling for Ripple Labs regarding retail sales of token XRP.

Here are the last week’s total movement; scroll in to see smaller caps:

International equities manager Magellan Financial Group reported a sharp decline in profits for the 2023 financial year.

Net profit fell 52% to $182.6 million, while revenue dropped 22% to $431.7 million.

The company’s total funds under management (FUM) also shrank from $61.3 billion to $39.7 billion. Institutional FUM stood at $21.4 billion, with retail at $17.8 billion.

The under-pressure group has appointed Andrew Formica as its new non-executive chairman to replace Hamish McLennan, who will transition to the role of deputy chairman.

Magellan’s flagship Magellan Global Fund returned 20.6% over the year net of fees, versus 22.4% for its benchmark, the MSCI All World Index.

Its Australian equities fund, the Airlie Australian Share Fund, returned 18.1% over the year, versus 14.8% for its benchmark, the S&P/ASX 200 Accumulation Index.

Despite the tough earnings, the company has seen explosive growth today, with shares up 16.85% at the time of writing.

Several lithium mining projects are facing delays due to a number of factors, including rising costs, supply chain disruptions, and environmental permitting issues.

One of the most high-profile delays is the Kachi project in Argentina, which is being developed by Lake Resources.

The project was originally scheduled to start production in 2024, but Lake Resources has now pushed back the start date to 2027.

Other lithium mining projects that are facing delays include the Thacker Pass project in Nevada, which is being developed by Lithium Americas, and the Salar del Hombre Muerto project in Argentina, which Livent is developing.

Average delays ~3 years for #lithium projects via Canaccord. pic.twitter.com/Fb8NEX2MMD

— Gigi Penna (@giginator_) August 17, 2023

Everything is looking red at the moment, but investors shouldn’t be too concerned yet.

August is typically a slow month. According to Dow Jones Market Data going back to 1896, the Dow usually gains an average of 1.1% in August.

‘Trading volume is notoriously light in August as both Europe and many Wall Street executives go on extended holidays. So I expect some market consolidation in the upcoming weeks,’ Louis Navellier, chief investment officer at Navellier Calculated Investing, wrote Tuesday.

As the old Wall St adage says, ‘Sell in May and go away’.

Markets remained concerned about the Fed’s actions, with hints of higher interest rates for longer than the market bet.

The minutes from the Federal Reserve’s July meeting, released Wednesday, showed that most policymakers still saw ‘significant’ upside risks to inflation, a sign that further rate hikes could be needed to slow the economy.

The Fed raised interest rates by 25 basis points at the meeting, but the minutes showed that some officials were open to a larger hike if inflation continued to rise. The central bank is now widely expected to stand pat at its next meeting in September, but expectations are growing for another hike in November.

Other news from the markets:

• Walmart raised its full-year guidance, citing strong demand for essential items.
• Cisco Systems’ stock rose after the company’s CEO talked up market share wins and artificial intelligence opportunities.
• Wolfspeed’s stock fell after the chipmaker issued a disappointing earnings report.
• Oil prices rose after a bigger-than-expected draw in U.S. inventories.

Everything is looking red at the moment, but investors shouldn’t be too concerned yet.

August is typically a slow month. According to Dow Jones Market Data going back to 1896, the Dow usually gains an average of 1.1% in August.

‘Trading volume is notoriously light in August as both Europe and many Wall Street executives go on extended holidays. So I expect some market consolidation in the upcoming weeks,’ Louis Navellier, chief investment officer at Navellier Calculated Investing, wrote Tuesday.

As the old Wall St adage says, ‘Sell in May and go away’.

Markets remained concerned about the Fed’s actions, with hints of higher interest rates for longer than the market bet.

The minutes from the Federal Reserve’s July meeting, released Wednesday, showed that most policymakers still saw ‘significant’ upside risks to inflation, a sign that further rate hikes could be needed to slow the economy.

The Fed raised interest rates by 25 basis points at the meeting, but the minutes showed that some officials were open to a larger hike if inflation continued to rise. The central bank is now widely expected to stand pat at its next meeting in September, but expectations are growing for another hike in November.

Other news from the markets:

• Walmart raised its full-year guidance, citing strong demand for essential items.
• Cisco Systems’ stock rose after the company’s CEO talked up market share wins and artificial intelligence opportunities.
• Wolfspeed’s stock fell after the chipmaker issued a disappointing earnings report.
• Oil prices rose after a bigger-than-expected draw in U.S. inventories.

ASX 200 falls after opening flat, now down 0.27% to 7,127

• $AUD up +0.10% at 64.07 US cents
• ASX futures up +0.10% to 7073.5
• S&P 500 down -0.77%
• NASDAQ down -1.17%
• DOW down -0.84%
• FTSE down -0.63%
• STOXX down -0.84%
• SSE up +0.43%
• Bitcoin down -6.95% to $US 26,723.17
• Spot gold down -0.12% to $US 1,891.07
• Iron ore up +0.01% to $US 105.18
• Brent Crude down -0.56% to $US 85.75pb

All figures shown are from 09:25am AEST