ASX200 Afternoon Report September 8th 2022

The ASX200 trades 106 points higher at 6836 at 2.55 pm Sydney time

After trading to a seven-week low this week, the ASX200 has spectacularly rebounded today following a better session on Wall Street.

The rally on Wall Street came as U.S yields fell following an oil price collapse, which eased fears around inflation and the prospect of continued aggressive central bank rate hikes.

A prospect further heightened after the Bank of Canada (Boc) raised rates overnight by "just" 75bp. The BoC becomes the first G10 Central Bank to slow the pace of its rate hiking cycle, bringing relief to be brows of beaten bulls.

Providing further bullish encouragement, the RBA's dovish tilt at Tuesday's RBA meeting that hinted at a more moderate rate of rate hikes going forward was also evident in RBA Governor Lowe's speech at the Anika Foundation lunch today

"We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly. And we recognise that all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises."

The IT sector outperformed as it powered higher on the back of a 27.5% rise in Tyro Payments to $1.25 after it received an unsolicited bid from a consortium of investors led by Potentia Capital Management. Life360 added 13.9% to $5.57, Novonix added 10.2% to $2.27, Megaport added 8.65% to $8.04 and EML Payments added 7% to $0.95c.

Gains for the Real Estate Sector as it embraced the idea that the speed of interest rate hikes may moderate. Domain added 3.44% to $3.31, Charter Hall Group added 3.25% to $13.03, Goodman Group added 2.7% to $19.10, and Stockland Group added 2.4% to $3.59.

The Financial Sector has gained even though the Big 4 banks are yet to pass on Tuesday's RBA rate hike as they all seek to avoid being the first mover who will take the brunt of the negative press. ANZ added 2.47% to $22.83, Westpac added 1.9% to $21.23, CBA added 1.6% to $95.60 and NAB added 1.33% to $29.70.

A 4% rally in iron ore futures to above $100 p/t has boosted the big miners. Mineral Resources added 6.45% to $63.34, FMG added 4.5% to $16.72, Rio Tinto added 2.7% to $91.84, and BHP added 1.53% to $36.82.

A 5.69% fall in the price of crude oil to $81.50, its lowest level in seven months, is good news for motorists ahead of the end of the fuel exercise discount in three weeks. However, bad news for the Energy Sector weighed on further by Woodside Energy as it traded ex-dividend, falling 5.33% to $32.16. Beach Energy fell 0.75% to $1.66, and Santos fell 0.38% at $7.78.

Today's strong rebound from yesterday's 6719 low goes a good way to negate the technical damage caused by yesterday's sell-off. It likely sets up the ASX200 for a period of choppy range trading between 6700 and 7100 in the weeks ahead - in line with our view of U.S equity markets.

Source Tradingview. The figures stated are as of September 8th, 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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