Market Wraps

Evening Wrap: ASX 200 falls, iron ore slides to US$100 + Does the US credit rating downgrade matter?

Thu 03 Aug 23, 5:12pm (AEST)

The S&P/ASX 200 closed 43 points lower, down -0.58%. 

The Index falls for a second straight session on weaker iron ore price and a weak lead from Wall Street, Australia's trade surplus remained mostly unchanged in June, China's services PMI remains in expansion territory, a closer look at the US credit downgrade and brace yourself for some heavyweight US earnings, with Amazon and Apple due to report overnight.

Let's dive in.


Today in Review

Thu 03 Aug 23, 4:45pm (AEST)

Name Value % Chg
Major Indices
ASX 200 7,311.8 -0.58%
All Ords 7,522.4 -0.61%
Small Ords 2,849.9 -0.70%
All Tech 2,561.2 -0.98%
Emerging Companies 2,125.6 -0.90%
Currency
AUD/USD 0.6535 -0.05%
US Futures
S&P 500 4,535.75 -0.03%
Dow Jones 35,420.0 +0.05%
Nasdaq 15,455.75 -0.11%
Name Value % Chg
Sector
Communication Services 1,575.6 +0.19%
Consumer Staples 13,158.0 -0.01%
Consumer Discretionary 3,035.8 -0.19%
Utilities 8,877.8 -0.27%
Industrials 6,848.7 -0.31%
Health Care 40,343.5 -0.45%
Real Estate 3,105.8 -0.48%
Financials 6,397.8 -0.49%
Energy 11,652.9 -0.79%
Materials 18,022.6 -1.06%
Information Technology 1,892.6 -1.63%

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ASX 200 Session Chart

2023-08-03 16 19 40-S&P ASX 200 (LIVE DATA) Share Prices & Charts - Market Index
ASX 200 falls and closes near session lows (Source: Market Index)

Markets

The ASX 200 continued to sell off on Thursday and a little off session lows. Every sector sector besides Telcos was red, with growth and resources leading to the downside. Singapore iron ore futures fell another 2% to US$101 a tonne (down almost 12% in the last six sessions) which weighed on BHP, Rio Tinto and Fortescue shares. The uptick in volatility and distribution these past couple of days is really starting to unravel (and exacerbated by the US credit rating downgrade). Tonight will be a massive session for US earnings, with Amazon and Apple reporting after the close. Get ready for some "ASX 200 to rise/fall on better/worse-than-expected earnings" headlines.

Economy

Australia’s trade surplus was $11.3bn in June, down from $11.8bn in May.

  • Exports fell $987m or 1.7% month-on-month reflecting an easing of coal, mineral fuels and metal shipments 

  • Imports fell $1.8bn or 3.9% month-on-month as slowing business activity weighed on domestic demand

China’s services PMI rose to 54.1 in July from 53.9 in June.

  • Beat consensus expectations of a fall to 52.5


Latest news


Market Insights

The US Credit Downgrade: Does it Matter?

On Wednesday, Fitch downgraded America's credit rating from AAA to AA+. But what does it actually mean?

Fitch placed the US on watch back in May but pulled the trigger due to a "steady deterioration in standards of governance over the last 20 years," with reference to the recent debt ceiling negotiations and January insurrection.

The downgrade was blasted by several figureheads including Janet Yellen, former Treasury Secretary Larry Summers and even JPMorgan's Jamie Dimon. The general view is that the rating is mostly symbolic and ultimately its the bond market that determines credit ratings.

While the downgrade might not be a big deal, it still triggered a bit of a selloff across equity markets and America's reputation (or ego) will also take a hit from the downgrade.

Funnily enough, the Atlanta Fed's first GDP nowcast for the third quarter came in at 3.5%. If this comes into fruition, it would mark the strongest inflation-adjusted growth since the December quarter 2021.

This isn't the first time the US' credit rating was downgrade. On August 8, 2011 the S&P cut its credit rating to AA+ on concerns about the government's budget deficit and rising debt burden. The S&P 500 tumbled 6.7% on the day of the downgrade and traded in an extremely volatile fashion over the next 2-3 months (and the ASX 200 traded in a similar fashion, chart below).

XJO 2011
ASX 200 performance in August 2011 (Source: TradingView)

Interesting news and movers

Trading higher

  • +8.0% Tietto Minerals (TIE) – July gold production

  • +5.6% Australian Strategic Materials (ASM) – Binding US agreement

  • +3.3% Virgin Money (VUK) – Earnings

  • +3.1% Bellevue Gold (BGL) – Drill results

Trading lower

  • -34.1% Solvar (SVR) – Preliminary earnings

  • -14.8% Aeris Resources (AIS) – Production update (Wed)

  • -11.9% Lindian Resources (LIN) – Maiden MRE

  • -3.8% Pinnacle Investment Management (PNI) – Earnings

  • -3.8% Downer (DOW) – Impairment and guidance

  • -3.2% Polynovo (PNV)

  • -2.7% Link Administration (LNK) – Preliminary earnings

  • -1.9% OFX Group (OFX) – Trading update

  • Tech sector move: Xero (-2.7%), Siteminder (-2.1%), Data#3 (-2.1%), NextDC (-2.0%), Wisetech Global (-1.4%)


Broker notes

Broker notes are unavailable today.


Scans 

Top Gainers

Code Company Last % Chg
LLI Loyal Lithium Ltd $0.55 +71.88%
FGL Frugl Group Ltd $0.016 +45.46%
BNZ BENZ Mining Corp $0.55 +37.50%
W2V Way 2 Vat Ltd $0.022 +37.50%
OKJ Oakajee Corporati... $0.02 +33.33%
View all top gainers

Top Fallers

Code Company Last % Chg
SVR Solvar Ltd $1.15 -34.10%
BOD BOD Science Ltd $0.09 -18.18%
ERW Errawarra Resourc... $0.081 -18.18%
EPM Eclipse Metals Ltd $0.014 -17.65%
VGL Vista Group Inter... $1.41 -17.06%
View all top fallers

52 Week Highs

Code Company Last % Chg
TMB Tambourah Metals Ltd $0.335 +27.62%
MM1 Midas Minerals Ltd $0.40 +11.11%
TGM Theta Gold Mines Ltd $0.125 +8.70%
PCL Pancontinental En... $0.022 +4.76%
WBCPK Westpac Banking C... $104.50 +1.76%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
SVR Solvar Ltd $1.15 -34.10%
ERW Errawarra Resourc... $0.081 -18.18%
CTQ Careteq Ltd $0.025 -16.67%
ZMM ZIMI Ltd $0.025 -16.67%
AIS Aeris Resources Ltd $0.23 -14.82%
View all 52 week lows

Near Highs

Code Company Last % Chg
AN3PI Australia and New... $104.01 +0.51%
PCI Perpetual Credit ... $1.02 +0.99%
WVOL Ishares Edge MSCI... $36.77 +0.22%
WBCPI Westpac Banking C... $103.60 -0.10%
GCI Gryphon Capital I... $1.975 +0.77%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
PGO Pacgold Ltd $0.245 0.00%
SDG Sunland Group Ltd $1.035 +0.49%
SBM ST Barbara Ltd $0.24 0.00%
STA Strandline Resour... $0.18 0.00%
LNK Link Administrati... $1.455 -2.68%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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