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10/06/21 10:53
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Investor Spotlight: banks buckle, energy fades, tech returns We examine what’s driving the outlook for US fundamentals, and hone in on one stock from each of the financial, energy and tech sectors. -
European banking confidence improves significantly as German IFO rises. Source: Bloomberg Indices DAX Technical analysis FTSE 100 Financial services Pullback (differential geometry) Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 28 March 2023 Reports that US officials will expand lending facilities to banks and confirmation of the acquisition of SVB's loans and deposits by First Citizens bank have helped restore a sense of calm to European banks and equity indices overnight. Also providing support, the release of robust macro data as Germany's IFO business climate index rose to 93.3 from 91.1 in February, the highest print since the Russian invasion of Ukraine (chart below). The bulk of the gains in the headline IFO index was driven by firmer expectations for the forward-looking Business expectations, which rose to 91.2 from 88.4 in February. The current conditions index also rose to 95.4 from 93.9 in February. The strong IFO number confirms the upside surprises in last week's flash PMI data. German businesses remain optimistic despite recent banking stress, which is expected to weigh in future months via tighter lending. IFO chart Source: Trading Economics Given central bank's stubborn focus on inflation, there will be keen interest in European inflation data later this week, which is expected to fall following sharp declines in wholesale energy prices. The flash estimate of Euro Area Harmonised inflation (Friday) is expected to print at 7.1% in March, down from 8.5% in February and well below its peak of 10.6% in October German Headline inflation (Thursday) is expected to fall to 7.3% in March from 8.7% in February. DAX technical analysis The view remains that the Dax completed a five-wave advance (Elliott Wave) from the October 11,829 low to the recent 15720 high and is currently tracing out a corrective pullback. The bounce from the 14617 low is viewed as Wave B or the second wave of the correction, which is missing another leg lower into the 14,400/14,200 support band. However, if the Dax first breaks above trendline resistance and the recent highs 15,700/20 area, it would indicate the correction is complete at the 14,617 low, and the uptrend has resumed. DAX daily chart Source: TradingView FTSE technical analysis The break below the band of horizontal support 7700/7650 in Mid-March confirms that a medium-term high is in place at the February 8047 high and that the FTSE is currently tracing out a corrective pullback. The bounce from the 7206 low is viewed as Wave B or the second wave of a three-wave correction that has room to extend back to resistance at 7700 before a deeper decline towards 7100/7000 in the weeks ahead. FTSE daily chart Source: TradingView TradingView: the figures stated are as of March 23rd, 2023. 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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According to figures released today by the Australian Bureau of Statistics (ABS), Australian retail turnover rose 0.2% in February. Source: Bloomberg Indices Inflation Consumer price index ASX S&P/ASX 200 Retail Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 28 March 2023 Ben Dorber, ABS head of retail statistics, said retail sales rose modestly in February and appear to have levelled out after a period of increased volatility over November, December and January. Why is today's retail sales data important for the RBA? The Minutes from the RBA's March Board meeting noted that it would be appropriate to pause its rate hiking cycle "at some point" to assess the effects of prior rate hikes. As part of its considerations, it would closely watch incoming employment, inflation, business surveys and retail sales data. The latest updates of those criteria showed: Employment data (released in mid-March) was stronger than expected Consumer confidence remains at GFC levels. Business Confidence is softening The Australian Composite PMI fell in March to 48.1 vs 50.6 in February Retail Sales are down 1.5% over the three months to February. What about inflation? Wednesday sees the release of the Monthly CPI indicator for February, a relatively new economic indicator that shot to prominence in the accompanying Statement from the March Board meeting. "The monthly CPI indicator suggests that inflation has peaked in Australia". The Monthly CPI indicator was also referred to extensively in the Meeting Minutes, which noted that tomorrow's release would include quarterly data on "domestic services inflation, which was not available in the January release". Domestic services inflation data encompasses restaurants & takeaway, hairdressing, urban transport fares, communication, as well as audio-visual & computing services and hobbies. For the record, the market expects the monthly CPI indicator to increase by 7.2% in February from 7.4% in January. The range of estimates extends from 6.7% to 7.7%. What does it mean for the RBA meeting next week? Given that the balance of data has slowed in recent months and due to the uncertainty created by the banking crisis, if tomorrow's monthly inflation indicator prints at or below the 7.2% expected, there is a good chance that the RBA will keep the cash rate unchanged at 3.60% next week. Aware that a print of 7.5% or higher would likely see the rates market rush to price in a rate hike at next week's Board Meeting. What does it mean for the ASX 200? The ASX 200 is trading at 7042, +80 points (1.15%), on track for its best day since Mid-January. Leading the charge, the heavyweight Energy (+3.98%), Materials (2.28%) and Financial (+1.36%) sectors. Today's rebound is in line with the view that the ASX 200 has been looking for a low. Providing it holds above support at 6900, the pullback from the February 7567 high is viewed as a countertrend (an "ABC" Elliott Wave correction) and we expect the rally to extend initially towards 7200 before 7350. ASX 200 daily chart Source: TradingView TradingView: the figures stated are as of March 28th, 2023. 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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