ASX200 Afternoon Report August 29th 2022

The ASX200 trades 140 points lower at 6964 at 3.15 pm Sydney time.

A disastrous start to a new week for the ASX200 as it tumbled over 2% to a low of 6943.2 (-161 points) shortly after the opening following a blood bath on Wall Street on Friday night.

The carnage on Wall Street came after the world’s most powerful central banker Fed Chair Jerome Powell, dashed misplaced equity market “hopetimism” of an imminent dovish pivot, noting the Fed would continue to raise rates and keep them higher for longer as it digs in to fight inflation.

The Fed’s hawkish comments pushed U.S 2-year yields to 3.466%, the highest since the end of 2007. The rates market is now about 89% priced for a third consecutive 75bp rate hike at the September FOMC meeting and for a 3.80% terminal rate by the end of Q1 2023.

Leading the market lower, the IT sector fell 4.69%. As viewed during the first half of 2022, growth stocks are susceptible to higher interest rates. Life360 fell 8.54% to $4.82, Megaport fell 8.07% to $6.95, Zip fell 7.78% to $0.83c. Fellow Buy Now Pay Later Names Block and Sezzle each fell around 7.7%.

Material stocks have fallen as growth concerns re-emerge on the Fed Chairs’ hawkish comments. Bluescope steel fell 4.3% to $16.67, FMG fell 4.2% to $19.03 as it cut its dividend by 42%. South32 fell 3.3% to $4.10, Rio fell 2.3% to 96.41 and BHP fell 1.7% to $42.10.

Australian retail sales for July were much stronger than expected at +1.3% m/m (vs +0.3% expected), easing concerns of a consumer-led slowdown.

Nonetheless, the share price of the big banks has not been immune from the round of panic selling. Nor have consumer-facing stocks. NAB fell 2.5% to $29.84, CBA fell 2.25% to $96.11, Westpac fell 2% to $21.25, and ANZ fell 1.9% to $22.52.

JB Hi-Fi fell 4.54% to $40.58, Webjet fell 3.66% to $4.87, Harvey Norman fell 3.76% to $4.22 Kogan fell 3.47% to $3.34 and Coles group fell 2.1% to $17.29.

After a horrendous run that saw its share price fall over 80% from $20.05 to a low of $3.90 in May, a2M has surged 9% to $5.36 after reporting stronger than expected earnings and a $NZ150m on market share buyback.

The share price of energy giant Woodside is trading 1.64% lower at $35.37 ahead of the release of its 1H 22 earnings report tomorrow. Beach Energy fell 1.7% to $1.73, and Santos is trading 0.44% lower at $7.88.

Following today’s tumble, the ASX200 is testing a solid band of support 6960/40 area. Providing it holds, I would expect a retest of resistance and the top of the range 7130/50 area. Aware that much below 6960/40 would warn a deeper retracement is underway.

Source Tradingview. The figures stated are as of August 29th, 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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