Evening Wrap: ASX 200 steady despite inflation shock — rate hike odds rise as gold and energy stocks power on
The S&P/ASX 200 closed 7.7 points lower, down 0.09%.
"Shock" inflation data cements not one, but two, likely interest rate hikes from the RBA before the middle of this year. Exclamation point, exclamation point!!
That's what most mainstream ASX evening wraps are leading with today. We're not leading with it so much, just noting that for all the hype — there was very little translation through to the ASX 200.
But that doesn't mean there weren't some very big moves within the index. Indeed, there were substantial winners and losers out of today's inflation news: and that's what we'll investigate...
Be sure to click/scroll through for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all the key economic data in tonight's Evening Wrap.
Also, I have detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch.
Let's dive in!
Today in Review
Wed 28 Jan 26, 5:46pm (AEST)
Name
Value
% Chg
Major Indices
ASX 200 8,933.9
-0.09%
All Ords 9,250.6
-0.19%
Small Ords 3,984.6
-0.08%
All Tech 3,243.1
-2.81%
Emerging Companies 3,442.4
-0.59%
Currency
AUD/USD 0.7
-0.18%
US Futures
S&P 500 7,039.5
+0.44%
Dow Jones 49,181.0
+0.04%
Nasdaq 26,326.25
+0.97%
Name
Value
% Chg
Sector
Energy 9,238.7
+2.33%
Materials 23,843.7
+1.35%
Utilities 9,735.7
-0.20%
Industrials 8,483.3
-0.26%
Financials 9,152.0
-0.33%
Real Estate 3,843.5
-0.86%
Consumer Staples 11,647.0
-0.94%
Communication Services 1,717.8
-1.06%
Consumer Discretionary 3,997.2
-1.26%
Health Care 34,360.5
-1.40%
Information Technology 2,035.7
-2.79%
Markets
ASX 200 Session Chart
The S&P/ASX 200 (XJO) finished 7.7 points lower at 8,933.9, 0.5% from its session high and 0.29% from its low. Somewhat of greater concern, i.e., not reflecting the narrow loss on the benchmark, in the broader-based S&P/ASX 300 (XKO) advancers lagged decliners by 89 to 181.
Fund flows
Makes a lot of sense when you think about it... 🤔
No doubt you’ve read about the negative reaction among analysts (and journalists reporting what those analysts had to say…) regarding today’s inflation data.
If you haven’t, then: 🔎
- It isn’t good for RBA on hold or cutting rates
- It is more likely going to push the RBA towards a rate hike sooner rather than later (market pricing was May, now it’s Feb, plus second hike pricing has reeled in from early-mid 2027 to mid-late this year).
Putting aside the dozens of hysterical headlines in the mainstream finance media, I (and I trust, now, YOU) prefer to look at how stock prices responded.
After all, the demand-side takes all that stuff into account.
The supply side takes all that stuff into account.
Each does their thing… and price discovery occurs. ⚖️
It’s a very pure and beautiful thing. It’s been happening since the dawn of economics. It will happen for many years to come. ♾️
So, what did ASX stock prices do today after the CPI data? Did they panic like the finance journos? 🤔
Well… looking at the intraday chart of the ASX 200, a.k.a the Old Tin Pot, above… hardly. Can I offer: we closed roughly at the same point we were when the data was released at 11:30 AEDT.
I think the saying is: “Don’t believe the hype”. 🙅
There was next-to-zero “surprise” factor in today’s data. The big money knew it was coming. Today's CPI data changed little as far as their demand-supply intentions are concerned.
However, this doesn’t mean all sectors and stocks within those sectors got away unscathed. There are certain sectors that are far more sensitive to the prospect of higher interest rates than others.
Interest rate sensitives
- Long duration — earnings-skew is into the future, higher market rates = higher discounting rate = more susceptible to discounting of future cashflows, also tend to have higher ratio of debt-funding as in growth phase.
- Consumer discretionary — rely on consumer spending to maintain and grow earnings — clearly going to be negatively impacted by the prospect of higher interest rates.
- Bond proxies — companies with bond-like earnings and dividend payouts. Rising interest rates lift bond yields, making bonds relatively more attractive and diminishing the valuation appeal of bond-proxy equities.
Interest rate agnostics
- Short duration — earnings now… less debt-to-fund-growth oriented… much lower impact of higher discount rate.
- Pricing power — usually cyclicals like commodities… the prices of which tend to rise in inflationary environments.
That’s the economic theory, anyway… so how did stuff play out on the ASX today? 🧐
Interest rates sensitives
- Information Technology (XIJ) (-2.8%) = Long duration
- Health Care (XHJ) (-1.4%) = Long duration
- Consumer Discretionary (XDJ) (-1.3%) = Consumer discretionary + Long duration
- Communication Services (XTJ) (-1.1%) = Long duration
- Consumer Staples (XSJ) (-0.9%) = Consumer discretionary
- Real Estate (XPJ) (-0.9%) = Bond proxies
- Financials (XFJ) (-0.3%) = Bond proxies
- Utilities (XUJ) (-0.2%) = Bond proxies
Interest rate agnostics
- Resources (XJR) (+1.6%) = Short duration + Pricing power
- Gold Sub-Index (XGD) (+2.2%) = Short duration + Pricing power
- Energy (XEJ) (+2.3%) = Short duration + Pricing power
To be fair, our major ASX sectors have been moving along these lines for over 6-months now. Hopefully you'll agree that this is the only Evening Wrap that has identified and tracked this move for just about that long. 💯
But! I guess when you look at the market though the lens of fund flows vs changes in the price of money — because ultimately that’s all movements in interest rates are — then stuff that happens on the share market starts to make a lot of sense.
See — we didn’t need all that finance journos hype! 😉
Today's best blue chip gainers
Company
Last Price
Change $
Change %
1mo %
1yr %
Evolution Mining (EVN)
$15.35
+$0.59
+4.0%
+18.6%
+171.2%
Northern Star Resources (NST)
$28.60
+$0.9
+3.2%
+5.9%
+65.5%
Santos (STO)
$6.82
+$0.2
+3.0%
+11.8%
-4.3%
Sandfire Resources (SFR)
$20.25
+$0.54
+2.7%
+13.3%
+104.5%
Woodside Energy Group (WDS)
$24.98
+$0.66
+2.7%
+7.9%
+0.1%
Genesis Minerals (GMD)
$8.13
+$0.2
+2.5%
+9.0%
+166.6%
Rio Tinto (RIO)
$154.82
+$3.62
+2.4%
+5.0%
+31.2%
Perseus Mining (PRU)
$6.43
+$0.14
+2.2%
+12.2%
+131.3%
Capricorn Metals (CMM)
$15.97
+$0.28
+1.8%
+8.8%
+110.1%
BHP Group (BHP)
$50.60
+$0.85
+1.7%
+10.9%
+29.3%
Newmont Corp. (NEM)
$183.79
+$2.85
+1.6%
+17.6%
+176.6%
Medibank Private (MPL)
$4.63
+$0.07
+1.5%
-2.9%
+21.8%
Qantas Airways (QAN)
$10.37
+$0.14
+1.4%
+0.9%
+12.2%
South32 (S32)
$4.56
+$0.06
+1.3%
+29.9%
+29.2%
Lynas Rare Earths (LYC)
$16.20
+$0.19
+1.2%
+28.9%
+138.9%
Whitehaven Coal (WHC)
$9.19
+$0.09
+1.0%
+16.9%
+44.3%
Ramelius Resources (RMS)
$4.97
+$0.04
+0.8%
+18.3%
+113.3%
Downer EDI (DOW)
$7.92
+$0.06
+0.8%
-1.2%
+45.6%
Brambles (BXB)
$22.91
+$0.16
+0.7%
+0.1%
+18.8%
AGL Energy (AGL)
$8.97
+$0.03
+0.3%
-3.7%
-22.8%
Today's worst blue chip losers
Company
Last Price
Change $
Change %
1mo %
1yr %
Life360 (360)
$28.52
-$2.35
-7.6%
-14.1%
+15.0%
Netwealth Group (NWL)
$24.99
-$1.1
-4.2%
-7.1%
-16.4%
Block (XYZ)
$92.33
-$3.81
-4.0%
-4.3%
-34.0%
Ampol (ALD)
$29.15
-$1.18
-3.9%
-9.6%
-1.8%
Wisetech Global (WTC)
$60.70
-$2.37
-3.8%
-11.7%
-49.0%
Cochlear (COH)
$267.65
-$9.61
-3.5%
+2.2%
-14.2%
JB HI-FI (JBH)
$83.02
-$2.87
-3.3%
-14.0%
-15.0%
PLS Group (PLS)
$4.81
-$0.15
-3.0%
+9.8%
+107.3%
Computershare (CPU)
$34.34
-$1.02
-2.9%
0.0%
+0.4%
IGO (IGO)
$9.10
-$0.27
-2.9%
+12.3%
+74.7%
Aristocrat Leisure (ALL)
$55.01
-$1.61
-2.8%
-4.4%
-18.7%
Nextdc (NXT)
$13.34
-$0.37
-2.7%
+2.9%
-16.9%
Seek (SEK)
$22.21
-$0.6
-2.6%
-3.4%
+2.0%
REA Group (REA)
$190.76
-$5.06
-2.6%
+3.5%
-20.9%
Technology One (TNE)
$26.47
-$0.64
-2.4%
-7.3%
-10.4%
Car Group (CAR)
$29.25
-$0.68
-2.3%
-4.0%
-25.4%
Charter Hall Group (CHC)
$23.53
-$0.52
-2.2%
-4.0%
+54.6%
Resmed Inc (RMD)
$36.82
-$0.78
-2.1%
+1.7%
-6.4%
Challenger (CGF)
$9.09
-$0.19
-2.0%
-4.6%
+48.0%
Pro Medicus (PME)
$186.28
-$3.89
-2.0%
-17.5%
-31.1%
ChartWatch
Nasdaq Composite Index
Analysis
We are officially in the 23722-24020 supply zone… 🥳
And based on Tuesday’s candle — there doesn’t seem to be a great deal of motivated supply there…
And based on the pedestrian volume — there doesn't seem to be a great deal of supply there at all.
The gap-open and run, resulting in a credible demand-side showing, however, suggests that there is a decent whack of demand-side motivation.
Size? Again, volume makes it hard to tell — demand simply isn’t encountering much supply… So, motivation is our best/only guide as to the demand-side’s strength and intent.
No change here. There’s all sorts of troubles in the world, and the usual cries of irrational exuberance and overvaluation… yet… the bull market — as it is its nature — has a habit of keeping on keeping on.
LONG LIVE THE BULL MARKET! 🐂💪
(You know the drill… we’re bulls until we see credible signals the supply-side is moving in to take control = black-bodied candles and or upward pointing shadows… lower peaks… lower troughs… volume and volatility spikes accompanying these…)
View
I remain at a 2/3RP portfolio risk limit 🪣 (RP = Risk Position — it reflects my personal allowable capital allocation limit for my investments in US stocks. So 1/2RP is 50%, 2/3RP is 67% and FRP is 100%). A credible demand-side candle from here will trigger a move to FRP vs a close below 22692 would trigger a move to 1/2RP.
Key levels
The next zone of demand is 22692-916. If the Comp closes below that zone,
