Market Update - 24th August 2024

Written by William Cooper

Domestic

The ASX has corrected after a dismal performance last fortnight, recording 10 straight days of positive returns which saw on Wednesday the ASX200 index return above 8000 points for the first time since the beginning of the month. The various sectors saw a mixed bag of results, the obvious outlier for the period being IT who rose a gargantuan 15.65%, comfortably outperforming the next best sector, industrials, who gained 6.02% for the fortnight. IT was bolstered by market-cap leaders WiseTech, Xero and NextDC who gained 34.5%, 9.76% and 12.72% respectively. WiseTech rocketed by 18.36% on Wednesday after the release of their earnings recorded a 28% year-over-year increase in revenues for FY2024, beating analyst estimates and seeing their income tip over the $1 billion mark.

Energy struggled to bounce back, with oil prices weighing heavily on the market, with the commodity falling for a fifth straight day on Thursday. China’s economic slowdown is a major factor for the weakened demand concerns, whilst weather-related disruptions and continued geopolitical risks across North Africa and the Middle East are creating opportunities for the prices to bounce back. Utilities was the only other sector that saw a fall, which was the result of a large single-day sell-off after sector giant Origin Energy released soft FY2024 earnings and weak energy market guidance. Whilst expected, the guidance was about 13% lower than investor consensus leading to the falls.

International

The U.S. is clawing back from its falls earlier in the month, with all 3 major market indices recording gains for the fortnight. The tech-dominated NASDAQ was the best performer of these indices, as the IT sector has risen consistently this fortnight. The Federal Reserve will meet Friday the 23rd, and investor sentiment points towards a rate cut. However, as per usual we will unpack this when we are certain of the outcome.

The DAX and STOXX Europe 600 saw gains for the fortnight, as investor interpretation of the recent European Central Bank (ECB) meeting minutes indicated that rate cuts could be seen as soon as next policy meeting in September. The ECB have maintained a restrictive policy to return inflation back to their target of 2%. Wage growth lowered in the second quarter of 2024 by 1.1% compared to that of the first quarter, raising investor hopes of an impending rate cut.

The Japanese Nikkei 225 has continued its slow and steady climb, watching the index move closer to its pre-August levels before the market collapsed. The growth has lost some momentum towards the back end of the fortnight, but given ideal monetary policy conditions (both domestically and in the U.S.) investors could still see the market rise above the all-time highs seen in mid-July.