ASX200 Afternoon Report September 7th 2022

The ASX200 trades 100 points lower at 6727 at 3.05pm

If the Labour Day long weekend was meant to provide a circuit breaker after the Fed Chairs' hawkish speech at Jackson Hole, then the bond market didn't get the memo as a surge higher in yields saw U.S equity markets extend their free fall overnight.

The weaker session on Wall Street was the backdrop for the local bourse to plunge 1.6% to its lowest level in seven weeks  (6719.6) an hour after the opening bell, a move that it has struggled to unwind during the remainder of the session.

A reversal lower in crude oil on fears over higher interest rates, recession, and Covid lockdowns in China, along with a 6.9% fall in European natural gas prices, unleashed carnage in Energy stocks.

Beach Energy fell 6.4% to $1.69, Woodside fell 3.15% to $33.98, Cooper Energy fell 3.7% to $0.26c, Santos fell 2.14% to $7.77. New Hope Coal fell 4.37% to $5.47, Coronado coal fell 3% to $1.68, Whitehaven coal fell 2.2% to $8.61, and Yancoal fell 0.6% to $6.67.

News that the lockdown in Chengdu is set to be extended weighed on metals prices and the price of the big miners. FMG fell 2.75% to $16.00, BHP fell 2.4% to $36.38. Rio Tinto fell 1.8% to $89.15, and Mineral Resources fell 1.5% to $59.43.

The national accounts released today showed the Australian economy in the June Quarter expanded by a solid 0.9% and 3.6% YoY. It's the third consecutive quarter of economic expansion for the Australian economy.

Today's figures coincided with the start of the RBA's rate hiking cycle in May and come just one day after the RBA raised rates by 50bps to 2.35%, leaving Q3 as the one that should reveal the impact of the RBA's 225bp of rate hikes to date.

While the statement that accompanied yesterday's rates decision hinted at a more moderate pace of rate rises, more clues may be forthcoming from the RBA Governors' Speech at the Annika Foundation lunch tomorrow.

Nonetheless, stocks in the Financial Sector weren't in the mood to wait around. NAB fell 3% to $29.22, Westpac fell 2% to $20.84, CBA fell 1.86% to $94.31, and ANZ fell 1.5% to $22.25.

Defying the melt-up in interest rates, the IT sector held its ground, led by gains in Link Administration which added 2.4% to $4.30, and Computershare added 1.5% to $24.46. Appen added 0.83% to $3.65 and Megaport added 0.55% to $7.30.

Unable to withstand the heat of an unrelenting rise in the U.S dollar and in USDCNY, the AUDUSD is trading at .6715, eyeing the .6681 low from mid-June. A break/close below .6681 would then see the AUDUSD move towards the next level of support, .6530/00.  

After today's acceleration lower, the ASX200 is vulnerable to a retest of the June 6407 low, with bounces expected to be met by sellers at 6850 and again at 7000.

Source Tradingview. The figures stated are as of September 7th, 2022. 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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