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Note from the MD: Markets calmed by tentative US debt deal, but upset by falling consumer confidence

Australian investors continue to have one eye fixed on US Congress, as it seeks to hammer out a deal to extend the government’s debt ceiling and avoid a catastrophic default. Progress on that front bolstered the ASX early week, with Monday delivering the largest one-day gain for over six weeks.
Australian investors continue to have one eye fixed on US Congress, as it seeks to hammer out a deal to extend the government’s debt ceiling and avoid a catastrophic default. Progress on that front bolstered the ASX early week, with Monday delivering the largest one-day gain for over six weeks. However, interest rate and inflation angst continue to hurt Australian market sentiment. Average consumer confidence for May fell to its lowest monthly level since the economic recession in December 1990.  That’s seen ASX-listed retailers lose significant shine over the past month, with Super Retail Group falling 14%, Premier Investments down 9% and Wesfarmers dropping 6%, as of market close 30th May. While the ASX 200 is in better shape than where it finished last week, it was still down for the month at yesterday’s close, and sitting 4.7% below its 52-week high. Eight of 11 sectors were lower over the last week, with Consumer Discretionary spending the biggest loser. It was down more than 2.2% for the last five days as the aforementioned cost-of-living pressures continue to mount. With the US debt deal seemingly headed in the right direction, Australian investors will be shifting their gaze to the Reserve Bank of Australia’s interest rate meeting next week, to see if borrowers and consumers are spared further pain. The ASX 200 (XJO) has broken below its 50 day moving average in recent days. Although it had a slight rebound it reverted back below on Tuesday 30th May. Market looks to be failing to find conviction to move higher by not closing higher multiple days in a row above the 50-day moving average.  The Relative Strength Index (RSI) hovers around the midpoint of 42, indicating a neutral stance. Additionally, the average True Range (ATR) remains relatively low, suggesting limited volatility in recent weeks. Traders and investors should closely monitor the key support and resistance levels for potential trading opportunities. A breakout below the 200 day moving average at 7,114 could signify a short term move lower to support at 6,946. While the market remains range-bound and lacks clear directional bias, it is important to exercise caution and wait for a decisive breakout or breakdown before expecting significant future movements. While the Metals and Mining sector is also down for the month, gold miners may take heart following a World Gold Council survey showing 24% of central banks intend to increase their gold holdings in 2023, spurred on by higher inflation, geopolitical turmoil and interest rate worries. On Thursday, 1st June at 12pm (AEST) we will be joined by Anthony Reilly, Managing Director and CEO of Felix Gold Ltd (ASX: FXG) – a gold discovery business with a 392-sqkm landholding in the world-class Fairbanks Gold District, where historical gold production exceeds 16 Moz. The company holds four key projects in the heart of Fairbanks which lie in close proximity to both Kinross Gold’s Tier 1 gold mine Fort Knox, and the rapidly growing Freegold Ventures’ discovery Golden Summit. Anthony will discuss the exploration success the team delivered in the short period since IPO, showing potential to host up to 3.6Moz in the Treasure Creek Project’ NW Array alone, the outlook for this deposit to feed the mill of the adjacent Fort Knox mine whose owner is actively seeking M&A opportunities and the potential of Felix’s other prospects in this world-class mining region. Click here to book your spot or request the replay. Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Felix Gold Ltd and may receive fees for its services. Past performance is not a reliable indicator of future performance.
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Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG)

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