The ASX lost yesterday’s gains and then some today, slipping 0.77% or 56.9 points to 7,307.80 and crossing below its 50-day moving average.
The news isn’t all bad, however, as the ASX200 is still up 0.78% for the week so far, 4.16% below its 52-week high.
Worst-performing stocks were Ramelius Resources Limited (ASX:RMS), down 10.91%, and energy giant Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF), down 7.23%.
Ramelius’ losses were likely because they’re about to be removed from the ASX200 altogether, a difficult prospect for any company, as many investment funds have mandates that do not allow them to invest outside of the ASX200.
Woodside’s stock price pain comes after positive full-year results indicated a hefty dividend of US$1.44 per share was on the cards.
While you’d think that would boost the stock, eligibility for the dividend payout is now closed, meaning any Woodside stocks traded from this morning will not receive the dividend payment.
The Energy sector is also down the most of any sector today, with a 4.12% dip today, applying pressure to all ASX200 energy stocks.
In the news
Wake-up call for US markets
Commentary from IG Australia market analyst Tony Sycamore’s Trader’s View has highlighted the impact of a potential 50 basis point (bp) rate hike flagged by US Federal Reserve chair Jerome Powell in testimony to Congress.
With the recent release of stronger-than-expected economic data, the Fed has stated that if the “totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
Markets thus priced in the rising probability of a 50bp hike, increasing from 31% to 69% yesterday. US 2-year yield closed up 5% for the first time since May 2007.
More from Tony Sycamore below.
“While a small number of Fed hawks had discussed the possibility of a 50bp rate hike in recent weeks, the centre of the committee had expressed a preference for a more extended sequence of 25bp rate hikes,” Sycamore said.
“Their reassurance had allowed US equity markets to start March on a firmer footing. In a nutshell, if Friday’s non-farm payrolls and next week’s CPI releases are much hotter than 215k and 0.4% expected, it will push the FOMC towards a 50bp rate hike in March.”
ASX200
“The ASX200 added 36 points (+0.49%) yesterday to close at 7,364.7.
“All of the day’s gains came after the RBA announcement at 2.30 pm after they raised rates by 25bp to 3.60% but softened its hawkish forward guidance by removing key works “increases” and “months” from a key paragraph in its February statement.
“In the lead-up to today’s RBA meeting, we thought, as did the market, it unlikely that the RBA would shift paths again quite so suddenly after their hawkish shift in February.
“However, as noted in our RBA preview here, if the words “increases” and “months” were omitted, it would allow a more dovish tone to emanate from the statement.
“Their omissions yesterday allow the RBA the optionality to deliver one more hike in April to 3.85% and then to go “on hold” - providing that upcoming Labour Force Data (March 16), Retail Sales (March 28), February Monthly inflation indicator (March 29) and the March quarter inflation data (April 26) show signs of moderation.
“All eyes now turn to this morning’s speech at 8.55 am AEDT from Governor Lowe at the AFR Business Summit in Sydney titled 'Recent Economic Data and Inflation'.”
The Australian Financial Review interviewed Lowe at the Review Business Summit today.
“Well, we are closer to a pause, and it’s a matter of logic really," Lowe explained in response to queries about a potential rate hike pause.
“As you increase interest rates higher you get closer to the point where it is appropriate to stop for a while and just assess the flow of data.
“We’ve done a lot in a short period of time. And at some point, it’s going to be appropriate to sit still and assess the collective effects of that.
“Before our next board meeting, we’ll have important data on employment, we’ll have another monthly inflation indicator, we will have more detail on retail spending and the business surveys.
“They are four really important pieces of data that we’ll look at, at our next board meeting.”
FX
“The AUD/USD is trading at 0.6585 (-2.22%), battered by the twin heavyweights of a dovish shift at yesterday’s RBA meeting and a more hawkish tone than expected from Fed Chair Powell’s testimony overnight (more details on both above),” Sycamore continued.
“The clean break of support at .6700/80 negated our positive bias, and sellers will likely emerge on bounces leaning against the band of resistance at .6700c/.6800c, which includes the 200-day moving average.”
Five at five
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