The Monday Report – 08 April 2024

Daily Market Reports | Apr 08 2024

By Greg Peel

Rollercoaster

Friday’s trade on the ASX ended up being an all-out battle between sellers and buyers. The ASX200 opened down -73 points on Wall Street weakness for all of ten minutes but by late morning was only down -31.

The sellers regrouped, and the index hit its low of the day at 2pm, down -76 points, before the buyers again moved in to close the index down -44. The buyers, it seems, were looking for bargains and risking the US jobs report overnight.

All sectors nevertheless closed in the red, suggesting it was more of a market game than a sector-specific game, although energy only just tipped into the negative.

The stock market appears currently divorced from the bond market – and the same is true in the US. On weak trade data, the ten-year yield fell -8 points to 4.10% but technology led the sectors down with -1.4%, real estate lost -0.6% and discretionary -0.5%.

Staples were down -0.7% so nothing defensive there, although moves to curb the supermarket duopoly are underway.

Materials were down -0.8% even with China closed, as iron ore miners kicked on to the downside and were not offset by gold miners.

The banks lost -0.4%.

But, Wall Street bounced on Friday night and our futures closed up 38 points on Saturday morning, so as you were.

The ASX200 nonetheless fell -1.5% over the week, and the index is back where it was two weeks ago.

Trade data for February showed exports fell -2.2% while imports jumped 4.8%, sending the trade surplus down to $7.3bn from $10.1bn in January. Economist had forecast a rise to $10.5bn, so a bit of a surprise.

The silver lining may be more room for the RBA to cut, as reflected in lower bond yields.

Good News Good?

Wall Street can’t seem to make up its mind at present on whether good US economic news is good or bad.

Last week began with news the US manufacturing PMI had swung into expansion in March, sending bond yields higher and the stock market tumbling. That news overruled Good Friday’s data that showed the core PCE had continued to fall in February.

Last Friday night the news was 303,000 jobs added in March when only 200,000 were forecast. Bond yields jumped again – the ten-year rose 7 points to 4.38% -- and the stock market took off.

There may have been some solace in that wages grew only 0.3% in the month, to a 4.1% annual rate, as expected, despite strong additions. This implies job vacancies are being filled without having to pay much higher wages, which suggests, maybe, the inflationary effect is not too ominous.

Wall Street did dip early on the release, but the buyers then moved in and indices rose steadily to the close. This suggests that after a tough week – the S&P500 closed down -1.0% for the week – buyers were yet again ready to pounce on lower valuations, and any excuse will do.

With bond yields rising further, the Nasdaq outperformed. Even the Russel small cap index rose 0.5%.