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Highlights
- The S&P/ASX 200 closed 0.10% lower, showing resilience despite modest losses.
- Gold and iron ore stocks rallied, helping respective sectors outperform.
- IT sector maintained a positive streak, marking its fifth consecutive win this week.
The Australian stock market experienced a quiet day with the S&P/ASX 200 (ASX:XJO) closing 8.1 points lower at 8,436.2, reflecting a slight 0.10% dip. This modest drop came amid sector rotation and end-of-month repositioning, a typical occurrence following non-trading days in the U.S. The broader market was similarly subdued, with advancers narrowly outpacing decliners in the S&P/ASX 300 (ASX:XKO) by a ratio of 144 to 129.
Despite the overall quiet session, there were notable sector movements driven by gold and iron ore stocks. The gold price saw a modest rally, which in turn boosted the Gold (ASX:XGD) sub-index by 1.06%, making it the top performer of the day. Similarly, iron ore stocks gained ground as iron ore prices inched upward, leading the Resources (ASX:XJR) sector to a 0.84% gain, placing it as the second-best performing sector.
Gold and Iron Ore Sectors Lead the Way
The gold rally provided some much-needed relief for the sector. As the price of gold edged higher, gold stocks saw a modest bounce, helping the Gold sub-index outperform the broader market. The modest rise in iron ore prices also sparked gains in the iron ore stocks, which led to a solid performance in the Resources sector.
In the midst of these rallies, the Information Technology sector (ASX:XIJ) continued its positive momentum, marking its fifth consecutive session of gains this week. The sector's strong performance highlights the ongoing demand from fund managers seeking consistent winners in a market that has been largely directionless. The Energy sector (ASX:XEI) saw a slight recovery, adding 0.09%, though it still experienced a notable decline over the week, ending as the worst-performing sector with a drop of over 3%.
A Modest Rally or the Start of a Seasonal Boost?
The price of iron ore has been a focal point for market observers, with recent price movements suggesting the potential beginning of the much-anticipated seasonal rally. As of now, iron ore prices have made only a modest ascent to the 105.40 level, which remains a key point of supply. While the rally is still somewhat underwhelming, the market has shown signs of demand-side control since the low of 95, with several positive candles signaling increasing demand.
Looking forward, if the iron ore price can surpass the 105.40 mark and establish a higher trough, the seasonal rally may gain more momentum. However, a pullback from this level would need to be shallow and followed by further signs of demand to solidify the case for a 2024 rally. Conversely, a close below 95 would likely extinguish any hopes for a seasonal rally this year, potentially setting up a decline to the 87.55-88.35 demand zone.
Despite the slight decline in the S&P/ASX 200, sectors such as gold, iron ore, and IT demonstrated resilience in today’s trade. The gold and iron ore rallies suggest there may be an emerging trend, especially in the Resources sector. However, the trajectory of iron ore prices in the coming days will be crucial in determining whether the seasonal rally for 2024 is truly underway. The Australian market remains dynamic, with sector rotations and repositioning driving market movements as the end of the month approaches.
