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Note from the MD: Tech sector proves resilient as markets suffer broad-based losses

It was a sea of red on the ASX yesterday. The benchmark ASX 200 index ended its two-day rally with a 49-point (0.7%) drop to close out the session at 7420.
It was a sea of red on the ASX yesterday. The benchmark ASX 200 index ended its two-day rally with a 49-point (0.7%) drop to close out the session at 7420. Losses were recorded across nearly every sector, with materials the worst of the pack, giving up 1.7% after iron ore, gold and base metal prices all fell. Consumer discretionary fell 0.7%, possibly related to the ANZ-Roy Morgan weekly consumer confidence index recording its biggest weekly fall in the past three months or so, while the telecommunications and energy sectors also recorded drops of 0.9% and 0.8% respectively. There was a lone survivor sector to emerge from this onslaught unscathed, however. Tech stocks lifted a respectable 0.2%, making it the only sector to lift during trading. Despite all this conjecture and noise, it’s important to note overall sentiment is still quite bullish and what we saw yesterday is really only some consolidation towards the end of a bullish year. This morning we saw the XJO index open around the key pivot point around the 7400 level. The market has now formed a triple top and a double bottom on the daily chart, seemingly unable to break out of its recent trading channel. The major opening loser was CBA, falling 7.59% to a low of $99.50 (dragging the XJO below 7400), before rebounding off this support level. This major move occurred following the release of CBA’s September quarter trading update. We will be watching which side of the 7400 level the market will hold in the coming days. A close above the 7400 level may form an ascending triangle formation, signalling a bullish move over the coming days. A close below the 7400 level may indicate a continued sideways grind. Futures markets were indicating a 19-point gain this morning after positive US retail data pushed Wall Street up overnight. In other news, there was a lot of talk about the RBA yesterday after the release of the minutes from this month’s board meeting and a speech from Governor Philip Lowe painted a very dovish picture of the people in charge of our monetary policy. That left investors feeling a little nervous about the possibility of an inflation breakout and how that could affect both prices and earnings.  Lowe also made the case that while wages in Australia are expected to rise in the coming years, they’re expected to climb only “gradually” and not add to inflation pressures as they have overseas. Perhaps today’s ABS wage price index data can add some more insight into what’s happening on that front – it’s something I’m sure a few of us will be making time to read through this afternoon. For those who are interested, the last ABS wage price index showed one of the slowest quarterly rates of growth on record. Concerns about a dovish central bank look to have spilled into the small and microcap sectors, too. The Small Ordinaries index (ASX: XSO) dropped back 0.9% while the Emerging Companies index (ASX: XEC) gave up 0.49%. There were quite a few miners among the day’s worst performers at this end of the market, with Iluka Resources (ASX: ILU), Resolute Mining (ASX: RSG), Liontown Resources (ASX: LTR) and Mount Gibson Iron (ASX: MGX) giving up between 4.05% and 6.4%. We have an upcoming webinar with a tech company targeting the US$1.7 trillion global Internet of Things (IoT) market amid the growing demand for big data and smart city solutions.  Traffic Technologies Ltd (ASX: TTI) is an Australian traffic solutions provider offering the only end-to-end software-as-a-service (SaaS) platform capable of addressing the combined infrastructure needs of road authorities, councils and power companies – three key players in Australia’s push towards IoT and smart city transformation.  Tomorrow at 11am (AEDT), Traffic Technologies’ managing director will join us to talk about the company, its plans for expansion and provide key business and investment highlights. Click here to attend.

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