Originally published by IG Markets
A two-year up-trend is over, bringing the ASX200 to levels not traded at since March this year.
ASX 200
The losses were broad based, as investors dumped stocks in sympathy with their US counterparts; no segment on the sectoral map left unscathed. The key level that was effectively eyed throughout the sell-off was 5860 – a close beneath of which would represent the end of the mentioned trend – and it was below there that the market closed on Friday. Early trade on Monday has the Australian share market plunging another 0.9%, apparently opening-up a challenge of psychological support at 5800. One of the few saving graces for the bulls now is that the Daily RSI is showing a drastically oversold market, and the momentum of the sell-off is gradually easing.
The Winners and Losers
Winning stocks were awfully difficult to find last week, especially as it applies to the large caps. Though the lower end of the market saw some price-spikes, the most significant S&P/ASX 50 player that saw notable upside was Fortescue Metals Group (AX:FMG), following news that that company was planning a $500m stock buyback program. On the sectoral map, it was a deep sea of red across the board: the losses were most contained in the defensive consumer discretionary sector, which only tumbled 1.4% for the week.
The losers were no challenge to find: the struggle is instead picking what were be the biggest laggards for the week. A theme in global markets was a rotation out of highly interest rate sensitive growth stocks. It was the big tech stocks that led losses in the US, and our information technology sector followed suit. But the greatest weight on the ASX 200 index last week was healthcare sector, led by a near 8% fall in Cochlear shares, along with energy stocks, after oil tumbled because of worries about global growth.
The little Aussie battler
Amid the fire and flames of the week’s global equity sell-off, price action in the usually risk sensitive Australian dollar was relatively subdued. No doubt the Australian dollar was weaker, with the AUD/USD covering up this fact primarily due to slide in the value of the greenback throughout the week. The go-to growth-versus-risk sentiment proxy, the AUD/JPY, gave-up considerable ground at stages, trading as low was ~78.70, while the battler ended the week a fraction lower against the euro and pound. The dynamic remains an unfavourable one for the local unit, with it surely only a matter of time before the yield give-up against the US dollar reasserts itself and sends the Aussie testing feeble support at 0.7040 within that pair.
The data week ahead
Event risk is high and geopolitical tensions may distract from the fundamentals. Headlines may well be hogged by Brexit developments, which is once more presenting as a possible source of disappointment for investors this week. The trade war will linger as it has done for months, and oil prices may experience volatility if hostility emerges between the global community and the Saudis over the alleged murder of journalist Jamal Khashoggi by the Saudi regime.
As it applies to fundamental data, FOMC minutes will be the major release for the week, potentially providing impetus for another spike in bond yields if the Fed presents a hawkish tone. Several releases out of China – the biggest, GDP figures – will provide clues into the fundamental strength of the Chinese economy. And the local calendar will be headlined by RBA Minutes on Tuesday and domestic employment data Thursday, though neither event is forecast to shift the dial for rates markets nor the Australian dollar, considerably.