Evening Wrap: ASX 200 slips as hawkish Fed sinks gold and mining stocks – CBA, WBC pick up the slack

The ASX 200 closed August with a session that felt uncomfortably familiar — Jackson Hole delivering a hawkish shock from Fed Chair Kevin Warsh, gold and mining stocks absorbing the full force of a repriced rate outlook, and the banks providing the refuge... ⚖️

Be sure to click/scroll through for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all the key economic data in tonight's Evening Wrap. Also, I have detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch.

Let’s dive in!

The S&P/ASX 200 (XJO) finished 16.3 points lower at 9,076.0, 0.5% from its session high and just 0.2% from its low. In the broader-based S&P/ASX 300 (XKO) advancers lagged decliners by a disappointing 115 to 174.

I bet you're looking at the gold price / your gold stocks and are wondering: Why! It was all going so well!? 🤷

Here's the chart that matters (and it's not the gold chart!) :

US 2-Year Treasury Yield – a closely watched proxy for the expected path of Fed interest rates

US Treasuries also sold off sharply. The one-year yield jumped 11 basis points to 4.15%, the two-year rose 14 basis points to 4.34%, and the 10-year climbed 6 basis points to 4.73% as investors rapidly repriced the US interest rate outlook.

The catalyst was a decidedly hawkish Jackson Hole message from Fed Chair Kevin Warsh, who warned the Fed still had “work to do” unless inflation was clearly returning to its 2% target. Markets responded by lifting the probability of a September rate hike from 35.4% to 55.7%, while pricing an 89% chance of a hike by December.

Gold Futures (Front month, back-adjusted) COMEX chart — note, live chart, so one extra candle to the 2-year T-Note's chart

That repricing delivered a double blow to gold. Higher Treasury yields increased the opportunity cost of holding the non-yielding metal, while the US dollar index jumped 0.61% – its biggest daily rise in around two-and-a-half months – making gold more expensive for non-US buyers. Jackson Hole effectively forced markets to confront the possibility that the Fed is not finished tightening.

So, it wasn't President Trump this time! 🤦

COMEX gold futures fell 2.9% on Friday before dropping a further 1.0% to US$4,483.60/oz in Asian trade. Pantoro Gold (PNR) (-5.9%), Northern Star Resources (NST) (-5.4%), Evolution Mining (EVN) (-5.0%), and Newmont (NEM) (-3.1%) were all sharply lower.

Materials (XMJ) (-2.0%) was swept up in the same risk-off mood — even as COMEX copper futures edged up 0.2% to US$6.673/lb and SGX iron ore futures gained 0.5% to US$99.25/t (their highest close since July 14), base metals and diversified mining stocks fell in sympathy with gold. The disconnect between commodity prices and equity prices reflected positioning and sentiment rather than fundamentals. Rio Tinto (RIO) (-1.8%), Sandfire Resources (SFR) (-1.7%), South32 (S32) (-1.7%), BHP (BHP) (-1.6%), and Capstone Copper (CSC) (-1.1%) all retreated.

Still looks strong, despite today's pullback!

Financials (XFJ) (+1.1%) was the session's clear best sector, with the big four banks doing the heavy lifting in a textbook flight to quality. When gold and mining stocks are being sold hard on global growth concerns and rate-hike fears, fund managers who must remain invested in equities find the major banks' combination of size, liquidity, and fully franked dividend income impossible to pass up! Westpac (WBC) (+1.9%), Commonwealth Bank (CBA) (+1.7%), ANZ (ANZ) (+1.3%), and National Australia Bank (NAB) (+0.9%) all advanced solidly.

Consumer Staples (XSJ) (+0.9%) absorbed the same defensive flows — non-discretionary earnings that don't depend on the rate cycle are precisely what investors reach for when the RBA and the Fed are both signalling further tightening. Woolworths (WOW) (+1.7%) and Coles (COL) (+1.0%) both firmed, the supermarket duo closing a month in which two consecutive results beats arguably reset the sector's valuation case.

Communication Services (XTJ) (+0.8%) caught defensive capital through its telco names, which carry utility-like earnings characteristics — predictable, contracted revenue streams with reliable dividends. TPG Telecom (TPG) (+1.6%), Telstra (TLS) (+1.3%), and Superloop (SLC) (+1.1%) all advanced.

Energy (XEJ) (+0.5%) was the fourth best sector as the US resumed strikes on Iranian military targets, sending ICE Brent crude futures surging 2.8% to US$90.57/bbl in Asian trade. SGX Australian Premium Coking Coal futures also gained 1.3% to US$270/t, adding momentum to the coal sub-theme.

Downstream fuel retailers and refiners led the sector — Viva Energy (VEA) (+3.5%) and Ampol (ALD) (+2.3%) were the standout movers, their refining margins expanding on the oil price spike. Coal names followed — Whitehaven Coal (WHC) (+2.5%), Yancoal Australia (YAL) (+1.6%), and New Hope Corp. (NHC) (+1.3%) all advanced. Oil and gas producers participated more modestly — Beach Energy (BPT) (+0.6%) and Woodside Energy (WDS) (+0.5%) edged higher.

Information Technology (XIJ) (-1.4%) tracked a weaker Nasdaq Composite from Friday as higher benchmark yields compressed valuations for long-duration, high-P/E growth stocks. Nuix (NXL) (-4.5%), Siteminder (SDR) (-3.8%), Xero (XRO) (-3.2%), and Megaport (MP1) (-1.9%) all fell.

Sprott Uranium Miners ETF (NYSE: URNM) chart — massive volatility continues!

In other commodities moves, uranium stocks extended their pullback, tracking the Sprott Uranium Miners ETF's (NYSE: URNM) 7.2% Friday plunge and a heavy fall in Cameco (NYSE: CCJ) (-5.6%). COMEX uranium futures fell 1.0% to US$89.50/lb — the first close below US$90 since the sector's recent surge. NexGen Energy (NXG) (-6.2%), Deep Yellow (DYL) (-4.4%), Bannerman Energy (BMN) (-3.5%), Paladin Energy (PDN) (-1.8%), and Boss Energy (BOE) (-1.7%) all fell.

GFEX lithium carbonate futures chart — approaching key overhead supply!

Lithium stocks bucked the broader materials sector malaise, tracking an ongoing commodity price recovery — GFEX lithium carbonate futures gained 1.2% to CNY 161,460/t and Australian spodumene concentrate in China rose 2.0% to US$2,280/t. Core Lithium (CXO) (+4.1%), Liontown Resources (LTR) (+2.5%), IGO (IGO) (+1.3%), and Pilbara Minerals (PLS) (+0.7%) all advanced, capping a volatile month for the sector on a positive note.

Analysis

It's still there...

The excess supply at 26789-27191, that is.

Stands out like a sore thumb. Or, it stands out like a black-bodied candle with quite a decent upward pointing shadow.

The Comp started Friday all bravado and gusto... carrying on from Thursday's gap and run reversal... but we know how a candle starts is irrelevant — how it closes means everything!

In the shadow of 26789-27191, the Comp found some motivated supply.

It was a decent whack of supply, too (check the volume — the highest since 6-Aug!).

"Whack" is a good word... Friday was like bopping a demand side whack-a-mole!

Tonight we'll get to see how much more the supply side has: both in terms of its motivation and size, plus just as importantly — how capable the demand side is at dealing with it.

A super interesting candle-and-volume combination in-bound. But when isn't it!? 😉

View

1/2RP on US stocks — actually feels about right given Friday's candle. Hey, I still think we're MOTN P ⬆️ here, but who cares what I think – it only matters what the market does! (RP = Risk Position — it reflects my personal allowable capital allocation limit for my investments in US stocks. So 1/2RP is 50%, 2/3RP is 67% and FRP is 100%).

Key Levels

26863 is the key point of supply vs 25910 and then the long term trend ribbon (presently 24112-25008) is the key point / zone of demand.

Analysis

First pass, you'd say: Wah, wah, wah... another lousy day on the OTP. What an OTP! 😭

But was it really so bad? 🤔

I mean, given Warsh's comments on the weekend and the massive spike in US rates... it could have been far, far worse.

Sure, gold got belted, and mining stocks pulled back — higher benchmark yields are a tax on the global economic growth that drives higher commodity prices.

But, surprise, surprise...

The loss in one major area of the OTP turned out to be a boon in another: Financials sector: +1.1% = Best day in nearly a month (was up as much as 2.0% at one stage!!!)

I don't know anything about betting and prediction markets... but if there's a book on XMJ down vs XFJ up and vice-versa... I suggest we each chip in 20 bucks to an account and start punting it! 💰💰💰

Hey, at least the cash stayed in and didn't leave the system.

I know, I'm scratching for positives here... but it's the OTP, remember! 🤦

As far as the technicals are concerned, today's candle isn't ideal... it's very similar to the Comp's = we prefer not to see any upward pointing shadows confirming the signals of building supply in the system:

• Lower peaks 9221 vs 9297. ⚠️

• Predominance of supply side candles, particularly the 26-27-Aug candles that punctuated the 9221 peak. ⚠️

• (After today's candle) only a very weak signal that the short term uptrend ribbon is able to hold up the price action in the short term. ⚠️

But, as long as the long term trend remains strong and intact (it does), and while the last point of demand at 9019 holds (it is so far...) — I'm prepared to give the OTP the benefit of the doubt. 🤞

View

I am 2/3RP on Australian shares (67% of my capital allocated to ASX shares can be invested, while 33% should be retained as cash).

Key Levels

9221-9297 is the key zone of supply to contend with, while 9019 is the go-no-go point for the current short term uptrend.

(Glossary of acronyms! Old Tin Pot (OTP): S&P/ASX 200 | MOTN: More Often Than Not | FOMO: Fear Of Missing Out | HOFU: Holding On For Upside | BTD: Buy The Dip | NUTE: No Urgency To Enter | FOHO: Fear Of Holding On | STR: Sell The Rally | RP: Risk Position | FFS: Fund Flow Shenanigans!)

***CHARTWATCH LIVE WEBINARS — NEW VIDEO DROPPED!!! 📺🍿***

Copper is rising, ASX copper stocks are surging – how high can BHP, RIO and SFR go? Plus: Lithium 🔋

TODAY

• AUS August MI Inflation Gauge: +0.5% m/m vs 1.0% m/m in July (annualises to 6.0% p.a. which is still crazy high, but better than last month's 12.0% p.a. clip!)

• AUS July Private Sector Credit: +0.6% m/m vs +0.7% m/m forecast and +0.8% m/m in June (softer than expected/plus slowing from June... better result as far as the RBA is concerned)

• CHN August Purchasing Managers Index (PMI) (readings > 50 = growth vs < 50 = contraction)

  • Manufacturing: 49.8 vs 49.5 forecast and 49.2 in July (contracting very slightly, better than expected, contracting at slower rate as July)

  • Non-Manufacturing: 49.0 vs 49.5 forecast and 49.0 in July (contracting, worse than expected, contracting at same rate as July)

LATER THIS WEEK

TUESDAY

• 11:30 AUS July Building Approvals (-4.8% m/m forecast vs +7.2% in June)

• 11:30 AUS Current Account (-29.7 billion forecast vs -27.1 billion in June)

WEDNESDAY

• 00:00 USA August ISM Manufacturing PMI (55.2 forecast vs 55.6 in July)

• 00:00 USA August JOLTS Job Openings (7.33 million forecast vs 7.36 million in July)

• 11:30 AUS June Quarter Gross Domestic Product (GDP) (+0.3% q/q vs +0.3% q/q in March)

THURSDAY

• No major economic data releases scheduled for this day...

FRIDAY

• 00:00 USA August ISM Services PMI (54.1 forecast vs 54.1 in July)

• 22:30 USA August Non-Farm Payroll

  • Non-Farm Employment Change: +58,000 forecast vs -23,000 in July

  • Unemployment Rate: 4.1% forecast vs 4.1% in July

  • Average Hourly Earnings: +0.3% m/m forecast vs +0.1% m/m in July