ASX 200 afternoon report: 31st of January 2023

The ASX 200 trades 13 points (0.18%) lower at 7468 at 3.30 pm Sydney time.

The ASX 200 has reversed lower this afternoon on month-end selling rebalancing flows, and softer-than-expected retail sales and housing credit data for December.

Housing credit growth for December rose by just 0.3%, the slowest pace since October 2022. At the same time, Retail sales fell by 3.9% in December (vs -0.2% expected), the most significant monthly fall since August 2020.

While these numbers won’t stop the RBA from raising rates next week or ease downside concerns around the Australian housing market or household consumption, they have helped to ease expectations around the RBA’s peak cash rate as it fell from 3.85% to 3.75%.

Consumer Staple sector

Falling house prices, higher inflation and RBA rate hikes which will weigh on discretionary spending, have been behind the defensive Consumer Staple sector outperforming.

• Woolworths added 3.2% to $35.88
• Coles added 2.45% to $17.77
• Metcash added 1.2% to $4.17
• Infant formula maker Bubs Australia plunged 9.15% on disappointing sales in China from extended lockdowns.

What does soft housing and retail data mean for the AUD/USD? Read Tony's analysis here.

IT sector

• Megaport plunged by 23% to $5.90 following a disappointing quarterly update
• BNPL stocks Sezzle -7.69%
• ZIP -3.28%
• Block -2.37% fell following the release of the weaker-than-expected retail sales numbers, which will weigh on earnings.

Financial sector

The big banks have reversed lower on the toxic mix of weaker credit appetite and evidence that households are beginning to feel the impact of the cost-of-living pressures.

• NAB fell -0.38% to $31.71
• ANZ fell 0.24% to $24.97
• Westpac fell -0.21% to $23.70
• CBA is trading flat at $109.77, after making a fresh all-time high earlier today at $110.45.

Mining sector

A mixed day for the material stocks despite a bounce in China’s PMI data, now in expansionary territory at 50.1 following China’s re-opening in Mid-December.

• Rio Tinto added 1.35% to $127.37
• Fortescue added 0.32% to $22.65
• BHP added 0.28% to $49.36
• Mineral Resources fell 3.2% to $89.57
• Lynas Rare Earths fell 2.94% to $9.43.

Technical analysis

Over the past five sessions, there has been a notable loss of upside momentum in the ASX 200 - understandable after a storming run higher in January. Additionally, the ASX 200 is overbought, and for the Elliott Wave enthusiasts, there is a five-wave advance from the October 6411 low on bearish RSI divergence, which warns of a possible pullback.

We continue to favour trimming longs ahead of the bull market 7632 high and looking to either buy a sustained break of the 7632 high or a pullback into the 7200/7000 support area.

ASX 200 daily chart

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