ASX defies gravity, energy and retailers push market higher, Appen tanks

The local market delivered a strong finish to the week, gaining 1.1 per cent on the back of a strong global lead.

The primary driver was a weakening of the rhetoric from Chair Powell in relation to the course of rate hikes in the coming months.

Energy and discretionary retailers were the standouts, gaining more than 2 per cent each with a number of technology names also rallying.

Tabcorp’s (ASX: TAH) post demerger recovery has continued, with shares gaining 4.7 per cent whilst struggling gambling company Pointsbet (ASX: PBH) and plus-size retailer City Chic (ASX: CCX) added 16 and 8 per cent respectively on hopes the turn away from growth was beginning to end.

All four banks rallied strongly, while material companies were more mixed.

BHP (ASX: BHP) and Rio Tinto (ASX: RIO) were up more than 2.4 per cent as good news emerges from China around lockdowns and supply chains.

Shares in Appen (ASX: APX) fell more than 20 per cent just a day after an incredible rally with the potential suitor, Telus, announcing then almost immediately withdrawing their offer for the business.

Virtus Health (ASX: VRT) is set to move on from CapVest and enter private negotiations with private equity firm BGH for their $8.15 per share offer.

Over the week just five sectors were higher, centred around commodities, whilst technology fell another 3.4 per cent.

Codan (ASX: CDA) was the standout, gaining 16 per cent, with PBH and TAH also adding 12 and 10 per cent respectively.
 
Losing streak ends, inflation slows, markets jump and China improves
 
Global markets finally ended a seven-week losing streak, with all three US benchmarks delivering a positive finish on Friday, led by the Nasdaq, which gained 3.3 per cent.

The S&P500 added 2.5 per cent and the Dow Jones 1.8 per cent as 29 of the 30 constituents delivered strong gains.

The rally came on the back of a long-awaited, but expected (in my view), the slowdown in inflation.

US core inflation increased just 0.2 per cent in April, the slowest since November 2020 after fuel prices fell during the month. The 12-month rate also slowed from 6.6 to 6.3 per cent.

Whilst the inflation rate is positive, consumer sentiment remains at a 10 year low as the combination of mortgage rates, fuel and an economic slowdown pressure consumers.

Cost Co (NYSE: COST) was a rare retail winner, gaining 1 per cent, after announcing revenue that beat their own estimates by US$1 billion, even though same-store sales slowed.

Dell (NYSE: DELL) gained 13 per cent with revenue jumping in the first quarter amid a return to office and cost increases not being as strong as expected.

But all eyes were on China, with Baidu (HK: 9888) and Alibaba both gaining more than 14 per cent after they beat expectations on higher advertising revenue and a jump in sales.

Over the week, the Dow gained 6.2, the S&P500 6.6 and the Nasdaq 6.8 per cent.
 
China begins to turn, layoffs galore, new government sworn in
 
The surprise of the week was a strong rally in China’s under pressure technology companies, with the likes of Tencent, Alibaba and JD.com delivering better than expected earnings results.

Alibaba added 15 per cent in the final session, with the CEO highlighting the impact of the COVID-19 lockdowns by flagging the improving numbers coming through their retail platforms.

There are growing signs that the booming labour market in the US is slowing, which combined with a buildup in inventories suggests the outlook for the economy may be weaker than expected.

The likes of Microsoft, Instacart, Lyft and PayPal were among just a few companies to flag significant cuts to their staff levels after dominating employment for the last two years.

And what a week it was for Australian politics with a surprising, to some, the election of a Labor government for the first time in close to a decade.

The story, however, was the falling support for the major parties, with one in three voting independents or for the minor parties.

What was clear, however, was that the populace is increasingly asking for action on climate change, whatever that may look like.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.