ASX200 steadies the ship into month end, setting up for a busy September

With just a few hours left to go, the ASX200 will finish August in positive territory, notably aided by month-end rebalancing flows over the past 48 hours.

The ability of the local index to close higher for a second consecutive month is a commendable effort, given that key equity markets in the U.S, Germany and China, barring a miracle, will close out the month in negative territory.

More so considering the fireworks provided by the Australian reporting season, ongoing growth concerns in China and Europe and Fed Chair Powell’s hawkish message at Jackson Hole that shattered hopes of an imminent dovish pivot.

The likely drivers of the ASX200 in September will continue to be the global thematics outlined above and key domestic macro drivers, including next week’s RBA meeting and Q2 GDP data which coincides with the start of the RBA’s tightening cycle.

In the lead-up to next Thursday’s GDP, the early partials, including retail sales, trade, and next exports, have been buoyant. However, construction data today printed much weaker than expected at -3.8% in Q2 vs expectations for a 0.6% rise. Declines were across all sectors, with residential construction particularly weak.

Labour and material shortages are hampering activity and present some early downside risks to next week’s GDP print, with preliminary estimates sitting just above 1% q/q.

Tomorrow sees the release of the Q2 Capex survey, which contains estimates of actual and expected new capital expenditure by private businesses for selected industries in Australia.

The market is looking for a slight increase in Capex of 0.2% in the June quarter. The 3rd estimate of 2022-23 planned business investment spending will likely be around $145bn, a 12% upgrade on the 2^nd estimate, slightly below what might be expected at this stage of the year.

Turning to the RBA, our base case remains for a fourth consecutive 50bp rate hike in September, followed by a 25bp rate hike in October or November, which will take the cash rate to 2.60%, and into the mildly restrictive territory before year-end.

The RBA is then likely to pause to allow time to assess the full impact of the rate hiking cycle on inflation, growth, and labour market data.

ASX200 Daily Chart

The ASX200 has this morning tested and bounced from the lower bound of the 6960/40 support area.

Providing the ASX200 continues to hold support 6960/40 (closing basis), I expect a retest of resistance and the top of the range 7130/50 area.

Aware that a daily close below 6940 would warn that a deeper retracement is underway, initially towards 6850.

Source Tradingview. The figures stated are as of August 31st, 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

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.