The Australian share market closed higher on Friday - its fourth weekly consecutive gain.
Follow the day's financial news and insights from our specialist business reporters on our live blog.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Market snapshot at 4.25pm
By Nassim Khadem
ASX: ASX 200 +0.3% to 7,493, All Ordinaries +0.3% to 7,709.5
Australian dollar: Steady at 71.11 US cents
Wall Street: Dow Jones +0.6% to 33,949, S&P 500 +1.1% to 4,060, Nasdaq +1.8% to 11,512
European markets: Stoxx 600 +0.4% to 454, DAX +0.3% to 15,133, FTSE +0.2% to 7,761
Spot gold: -0.35% to $US1,923.6/ounce
Brent crude oil: +1.57% to $US87.47/barrel
Iron ore: +0.57% to $US126.30/tonne
Bitcoin: -0.84% to $US22,827.00
Australian sharemarket closes 0.3% higher, in fourth consecutive week of gains
By Nassim Khadem
The S&P/ASX 200 rose 0.3 per cent or 25.5 points to 7493.8, ending on its the fourth consecutive weekly gain.
Global shares rose over the past week continuing their rally on signs global inflation may have peaked.
AMP Capital chief economist Shane Oliver says investors are hoping central banks will become "less hawkish and that there will be a soft landing".
"Despite worse than expected CPI inflation data and increased market expectations for RBA rate hikes — with the market's expected cash rate peak this year rising from 3.45 per cent to 3.75 per cent — the Australian share market rose for the fourth week in a row and is now less than 2 per cent below its all-time high," he said.
The fact that Australia's rate of inflation rose to 7.8 per cent in December quarter is likely to tip the RBA into another 0.25 per cent rate hike in February.
"There is still a strong case for the RBA to pause on rate hikes given the rapid rate hikes to date, to allow for the lagged impact of rate hikes to work and given the risk of unnecessarily knocking the economy into recession," he said.
"And we think they should pause in February. However, given the stronger than expected rise in underlying inflation in the December quarter, the RBA is likely to want to reinforce its inflation fighting credentials again to keep inflation expectations down particularly given the risks of wages breakout."
That's it from us today for the markets blog. Thanks for being with us, and have a lovely weekend!
Westpac forecasts RBA cash rate to peak at 3.85% in May
By Nassim Khadem
Westpac now expects the Reserve Bank to take the official cash rate up to 3.85 per cent by May following higher-than-expected inflation of 7.8 per cent in the December quarter.
This compares to the banks' previous expectations of a peak cash rate of 3.7 per cent.
Westpac expects the RBA to increase the cash rate in February and March, pause in April, and lift again in May.
Westpac chief economist Bill Evans said wage pressures in Australia still had some way to run.
He forecast annual pay to lift 4.5 per cent by June, from 3.1 per cent in the year to the September quarter 2022.
Inflation boosts the federal tax take
By Nassim Khadem
The Australian federal budget was in deficit to the tune of $9.4 billion over 2022, new government data shows.
Independent economist Chris Richardson says better-than-budgeted outcomes are the norm around the world right now because inflation is doing the heavy lifting.
"Inflation boosts the tax take more than it boosts government spending," he said a note released on Friday afternoon.
"Even more importantly, though, it's an old truth that inflation redistributes wealth – not between rich and poor, but between debtors and creditors."
"And pretty much all governments are debtors, and they all had to load up even further on debt through the COVID crisis."
Dr Richardson notes huge improvements in budgetary positions in many nations including Australia - see the chart below from Oxford Economics.
"Australia isn't a large debtor by global standards," he said.
"Today's data showed net federal debt to be $525.4 billion, meaning that it continues to be about half of the 'trillion dollar debt' that many people believe it to be.
"And, given that we're not a big debtor, you might think Oz wouldn't have seen the budgetary improvements that others have.
"Yet you'd be wrong. We are getting the same two key benefits as many others – inflation is adding more to revenues than it is to spending, and it is reducing debt-to-national-income ratios by both lowering debt and by boosting (nominal) income."
"Australia also happens to sell food and fuel to the world, and the price of those rose on Putin's invasion of Ukraine. That provided an extra boost to the tax take here."
He says China's re-opening has added to iron ore prices, and that means "the boost to revenues is bigger in Australia than elsewhere, and the boost to national income is bigger in Australia than elsewhere".
Consumers could see cheaper flight prices by mid 2024
By Nassim Khadem
Consumers could see cheaper flight prices by mid-next year, once the airline industry gets back to "equilibrium", according to the president of Emirates, Sir Tim Clark.
He noted Chinese tourists had not been able to spend on anything for three years because of COVID lockdowns.
"They're ready to go back — (that will) keep demand high," he told ABC News.
But thereafter prices could fall.
"I would say you will get to that (lower pricing) in the middle of next year, maybe even sooner."
Asked whether he thought airlines were holding back on ramping up capacity in order to keep prices elevated and recoup profits they lost during the pandemic, he said: "I don't believe there's any move to suppress supply to keep the prices up".
Emirates will be operating 63 weekly services to Australia by mid-year. These flights will mean that 55,000 passengers per week can travel to and from Australia's main cities.
Airlines would need to hit the "sweet spot of price" that ensures what consumers pay is "commensurate with the margins that the business needs to sustain itself".
"My view is that as soon as you start getting a restoration to equilibrium, you will start getting a readjustment of the price," Sir Clark said.
"If we can get some equilibrium in the oil markets, if we can get equilibrium in supply chain, etc, prices will fall and then logically, prices should come down.
"Whether they'll go down to pre pandemic (levels), I don't know."
The Dubai-based carrier has said it will restore flights on the popular Melbourne and Sydney routes to pre-pandemic levels by the middle of this year.
The airline is also restarting services to Christchurch via Sydney, to better service the popular trans-Tasman route to New Zealand's South Island.
ACCC forecasts gas shortfall this year
By Michael Janda
The Australian Competition and Consumer Commission (ACCC) is predicting a supply shortfall of 30 petajoules (PJ) in Australia's east coast gas market this year if LNG producers chose to export all their uncontracted gas.
But the ACCC says the LNG producers have enough uncontracted gas to prevent a domestic shortfall.
"In July last year, the ACCC forecast a 56 PJ supply shortfall in 2023. Today's report shows that outlook has improved, with Australia's east coast now forecast to produce 1,983 PJ of gas in 2023 compared to demand of 2,013 PJ. 1,296 PJ of that gas is forecast to be exported overseas by the three LNG ventures in Queensland under long-term contacts.
"The LNG producers are also expected to produce a further 146 PJ more than they need to meet their contractual commitments, of which 30 PJ is needed domestically to avoid a shortfall.
"The report shows that the three LNG producers have been net withdrawers of gas from the domestic market since 2021, buying more gas from other gas producers than they supply to domestic customers, which has worsened the gas shortfall.
The ACCC report also noted the record high in gas prices last year, although it added that suppliers were seeking even higher prices but were rebuffed by commercial customers.
"The report shows prices offered for supply on the east coast in 2023 increased sharply last year to the highest levels the ACCC has observed in the almost six years of its gas inquiry.
"Between March and August 2022, the average price of supply offers from gas producers to commercial and industrial users increased by 88 per cent to $19.77 per gigajoule (GJ), compared to the previous six-month period.
"However, as many higher priced supply offers were not accepted by users last year, the average price of supply contracts signed by producers increased by 30 per cent to $12.38 per GJ between March and August 2022, compared to the previous six-month period."
Market snapshot at 12:30pm AEDT
By Michael Janda
ASX: ASX 200 +0.3% to 7,493, All Ordinaries +0.3% to 7,713
Australian dollar: Steady at 71.17 US cents
Wall Street: Dow Jones +0.6% to 33,949, S&P 500 +1.1% to 4,060, Nasdaq +1.8% to 11,512
European markets: Stoxx 600 +0.4% to 454, DAX +0.3% to 15,133, FTSE +0.2% to 7,761
Spot gold: +0.1% to $US1,931/ounce
Brent crude oil: +0.2% to $US87.65/barrel
Iron ore: +1% to $US126/tonne
Bitcoin: -0.8% to $US22,891
ASX holding onto gains at lunchtime
By Michael Janda
The Australian share market is holding on to most of its morning gains as we pass midday in the south-east.
Both the All Ords and ASX 200 indices are up about 0.4 per cent, with tech stocks among the big gainers after the Nasdaq shot the lights out on Wall Street overnight.
Consumer staples, real estate, financial and mining stocks were doing well too, while healthcare and energy were the two drags on the market, with coal stocks dominating the energy slide.
The top five gains on the ASX 200:
- Liontown Resources: +5.5% to $1.625
- Megaport: +5.3% to $7.30
- Wisetech Global: +4.3% to $58.515
- BlueScope Steel: +4% to $19.66
- Karoon Energy: +3% to $2.39
The five biggest losers on the ASX 200:
- New Hope: -7% to $5.97
- Whitehaven Coal: -5.7% to $8.52
- Chalice Mining: -4.8% to $6.18
- Regis Resources: -4% to $2.18
- Tabcorp Holdings: -3.6% to $1.07
Overall, 119 of the top 200 stocks were trading higher, while 75 were in the red.
Bonza set to take to the skies
By Michael Janda
It's been quite a while sine the new airline 'launched' with much fanfare but, having recently obtained its licence to operate, Bonza is about to take off.
"Budget airline Bonza is selling tickets for its first flights out of the Sunshine Coast next week.
"The airline's inaugural flight, destination Prosperine, will take place next Tuesday."
Read more from Josh Dye at ABC Sunshine Coast:
Will savings save us from recession?
By Michael Janda
Some interesting observations about the household savings rate and how it affects the outlook for the economy and interest rates from JP Morgan economist Ben Jarman.
Here's the highlights:
"The saving rate has fallen more than 10 percentage points from the peak, adding a very strong tailwind to consumption over the last year. That decline to more normal levels is a finite process, and should be wrapping up soon, leading consumption growth to slow," he wrote.
"The accounting is that every 1 percentage point fall in the saving rate will, other things equal, raise consumption growth by 1 percentage point."
This graph illustrates how that relationship has played out in recent years:
"The obvious point is that if the saving rate normalization has been driving consumption growth, and can't go on forever, consumption growth must slow.
"Of course, there is some interaction with interest rates here: higher rates reducing the pot of income available for both spending and saving. The saving rate is calculated from disposable income, which already has interest servicing costs deducted."
Ben Jarman says this is important, because a slowdown in consumption caused by Australians deciding to stop running down their savings further is a lot less dangerous than one caused by borrowers simply being unable to sustain their current lifestyle due to rising mortgage costs.
"Should we care about what is really driving the slowdown? In our view, yes, because a slowdown driven by interest rates can snowball, whereas one driven by changes in the saving rate is less likely to.
"To see why, note that if interest rates rise enough that they create a cashflow deficit for many households, then the level of consumption is too high, and needs to be cut to sufficiently below disposable income. In a lagged, fixed rate reset dynamic, that adjustment can be abrupt, and more likely to create spillovers to the labor market, feeding back to consumption, etc."
He thinks Australia's consumption growth slowdown will be mainly driven by people stopping dipping into their savings, rather than too many being unable to afford their mortgages.
However, Reserve Bank modelling suggests a substantial minority of mortgage borrowers will have trouble meeting their repayments even if they cut virtually all their non-essential spending.
Fortescue closing in on 200 million tonnes a year
By Michael Janda
Fortescue Metals Group has delivered its December quarter production update, revealing that it shipped 49.4 million tonnes of iron ore.
The company has maintained its full-year production guidance at 187-192 million tonnes.
Fortescue revealed it had received an average price of $US87 per dry metric tonne for its iron ore over the quarter, while its C1 cost of production was $US17.17 per wet metric tonne.
The company is also expecting to soon commission its new Iron Bridge mine and is pushing ahead with other projects.
"Demand for Fortescue's suite of iron ore products remains strong and our entry into the higher grade segment of the market has been well received, with significant interest in the Iron Bridge magnetite concentrate," said executive chairman Andrew Forrest in the update.
"This is further supported by the Belinga Project in Gabon, with engagement rapidly advancing and very positive geological assessments from ground mineral surveys. The initial drilling program is expected to commence in March 2023.
"We also continue to develop our rare earths division as announced at the 2022 Annual General Meeting."
The mining analysts at RBC say the results were broadly in line with, or slightly better than, expectations.
"FMG posted another strong operational result for 2Q, beating RBCe and consensus on shipments and pricing.
"Nevertheless, cash generation/net debt was in-line (despite less capex being spent). FY23 guidance has been maintained, as expected, but a further minor Iron Bridge delay and higher capex have been flagged."
Fortescue is also pushing ahead with its clean energy projects, according to its founder.
"We've made strong progress on our massive iron ore interest in Gabon, our electrolyser facility in Gladstone, our battery facility in the UK and our green energy projects all over the world," said Mr Forrest.
"The unique technical strength and commercial potential of battery prototype design and maker WAE Technologies in Oxfordshire, will be developed through transitioning from prototype design to manufacturing and distribution of world leading mobile storage systems.
"Our first manufacturing facility in Kidlington will be commissioned in April. To accelerate and globalise this transition, Mark Hutchinson has been appointed Chairman, tasked with growing WAE into a multi-billion dollar green technology, battery and vehicle control systems company."
Fortescue shares were 1.25 per cent higher at $22.76 shortly before 11:00am AEDT, amid a general rise for the iron ore mining sector.
Market snapshot at 10:20am AEDT
By Michael Janda
ASX: ASX 200 +0.5 to 7,507, All Ordinaries +0.5% to 7,727
Australian dollar: Steady at 71.16
Wall Street: Dow Jones +0.6% to 33,949, S&P 500 +1.1% to 4,060, Nasdaq +1.8% to 11,512
European markets: Stoxx 600 +0.4% to 454, DAX +0.3% to 15,133, FTSE +0.2% to 7,761
Spot gold: Steady at $US1,929/ounce
Brent crude oil: +1.9% to $US87.72/barrel
Iron ore: +1% to $US126/tonne
Bitcoin: -0.3% to $US23,012
Australian share market opens higher
By Nassim Khadem
The Australian share market opened higher as Wall Street rose on the back of stronger-than-expected economic data, which revealed inflation slowed for the sixth-straight month in December.
At 10.14am the ASX 200 opened 0.44 per cent higher at 7,501.50.
The Australian dollar was US71.15 cents at market open.
Adani may take legal action against Hindenburg Research
By Nassim Khadem
Adani Group said it is evaluating "remedial and punitive action" under US and Indian laws against short-seller Hindenburg Research, which in a report accused the conglomerate of improper use of offshore tax havens.
The firm's report, which it said was based on a two-year investigation, accused Indian conglomerate Adani Group of engaging "in a brazen stock manipulation and accounting fraud scheme over the course of decades".
The report sent the company's share price lower and saw billionaire mining magnate Gautam Adani's net worth drop by $8 billion.
In a statement, Adani Group head of legal, Jatin Jalundhwala, called the report by the US research firm "maliciously mischievous" and "unresearched".
"We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO (Follow-on Public Offering) from Adani Enterprises," it said.
"We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research."
More interest rate rises expected in February and March: NAB
By Nassim Khadem
A note from NAB markets research suggests another two interest rate rises are on the cards following higher than expected inflation data released this week.
NAB's view remains that the RBA will hike rates by 25 basis points in February and March, taking the cash rate to 3.60 per cent, and then a pause by the central bank thereafter.
The key figures that will give a better indication of the Reserve Bank's moves beyond that will be the Wage Price Index on February 22, and National Accounts on March 1, to assess whether wages growth is still consistent with inflation returning to the Reserve Bank's 2 to 3 per cent target range.
NAB says an "explicit pause signal" from the Bank of Canada after it hiked by 25 basis basis points as expected on Wednesday has many thinking whether other central banks will do likewise.
BoC said any pause would be "conditional on economic developments" unfolding.
The BoC forecasts inflation falling to 3.6 per cent in 2023 and 2.3 per cent in 2024.
Market snapshot at 8:00am AEDT
By Michael Janda
ASX: ASX SPI 200 futures +0.4% to 7,459
Australian dollar: +0.2% to 71.16
Wall Street: Dow Jones +0.5% to 33,916, S&P 500 +0.8% to 4,048, Nasdaq +1.4% to 11,474
European markets: Stoxx 600 +0.4% to 454, DAX +0.3% to 15,133, FTSE +0.2% to 7,761
Spot gold: -0.9% to $US1,929/ounce
Brent crude oil: +1.5% to $US87.41/barrel
Iron ore: +1% to $US126/tonne
Bitcoin: -2.3% to $US23,061
Wall St gains, ASX to follow
By Michael Janda
Good morning and welcome to today's blog, where Nassim and I will take you through the market action throughout the day.
And it looks set to be a mildly positive start to trade.
ASX futures were up 0.2 per cent to 7,449 at 6:00am AEDT.
The Dow Jones Industrial Average rose 87 points, or 0.3 per cent, to 33,831, the S&P 500 gained 24 points, or 0.6 per cent, to 4,040 and the Nasdaq Composite added 122 points, or 1.1 per cent, to 11,436.
