US markets slumped a day after the Fed hiked rates — the biggest daily percentage drop in three months — but the ASX did not suffer as badly.
See how the day's market action unfolded on the ABC's stock market blog for Friday, December 16.
Disclaimer: This blog is not intended as investment advice.
Live updates
Market snapshot at 4:35pm AEDT
By Michael Janda
- ASX 200: -0.8% to 7,149
- All Ords: -0.7% to 7,338
- Aussie dollar: 67.00 US cents
- On Wall St: Dow -2.3%, S&P 500 -2.5% , Nasdaq -3.2%
- In Europe: Stoxx 600 -2.9%, FTSE -0.9%, DAX -3.3%
- Spot gold: +0.1% $US1,779/ounce
- Brent crude: -0.4% at $US80.91/barrel
- Iron ore: +3.1% to $US113.15/tonne
- Bitcoin: Flat at $US17,389
ASX closes moderately lower
By Michael Janda
Good arvo, I'm joining you again for the last post of the day.
What had threatened to be a major sell-off, after steep falls on Wall Street and in Europe overnight, turned into a comparatively orderly sell-down.
The ASX 200 index closed down 0.8 per cent, the All Ords was off 0.7.
Utilities and industrials were the biggest losers, dropping more than 2 per cent.
The energy sector gained slightly, but 135 of the top 200 stocks lost ground, while just 55 gained.
While the future path of inflation, interest rates and economies remains as uncertain as it does right now, there's likely to be a fair bit more volatility ahead.
I won't be here to see it over the next few weeks though, as I take a short summer break. See you in 2023.
The 'Santa rally' might be coming
By Daniel Ziffer
More on what might happen next week, this time from AMP chief economist Shane Oliver.
Dr Oliver reckons people will be feeling good, so the market will lift.
"While the risks remain high around inflation, interest rates, recession, the war in Ukraine and China, the Santa rally normally kicks in around mid-December on the back of festive cheer and new year optimism, the investment of any bonuses, low volumes and no capital raisings at this time of year."
Wait, what? What's the 'Santa rally'?
He explains.
"Over the last 15 years the period from mid-December to year end has seen an average gain of 0.8pc in US shares with shares up in this two-week period 11 years out of 15. In Australia, over the last 15 years the average gain over the last two weeks of December has been 1.5pc with shares up 10 years out of 15. It has tended to be weaker or less reliable in years when the market is down year to date though."
Here are his tips for 2023.
Shares: They're "likely to outperform again, helped by stronger economic growth than in other developed countries" and stronger growth in China
Expect the ASX 200 to end 2023 at around 7,600, he says.
At 3.30pm AEDT it's at 7,169.20
Property: Prices are "likely to fall further as rate hikes continue to impact". Dr Oliver sees a "top to bottom fall of 15-20pc" bottoming out near the September quarter, before gains.
AUD: A rising trend in the $A is likely over the next 12 months, "reflecting a downtrend in the now overvalued $US, the Fed moving to cut rates and solid commodity prices helped by stronger Chinese growth."
All things to think about over the summer.
This week? Almost done. Here's what's happening next week
By Daniel Ziffer
Put a pin in this one. The market (and blog) isn't over, but it's time to look ahead to next week.
Commonwealth Bank economist Stephen Wu has a good summary of what we can look forward to in the pre-Christmas week.
On Tuesday the Reserve Bank will release the minutes of the December Board meeting. Barring disasters, it's their final piece of communication for the year.
In each meeting since the September meeting, the RBA Board has discussed raising interest rates by either 25bp or 50bps. The Board has also stated that it is “prepared to keep rates unchanged for a period”. So a critical piece of information from the December minutes will be the size of interest rate increases considered by the Board.
Now, let's go overseas. The Bank of Japan will meet. Like a lot of developed nations, we share problems.
"Japan’s inflation dynamics have improved, inflation expectations have increased, and wages growth has picked up. But these positive trends have not been sustained," Mr Wu writes.
"Therefore, we expect the BoJ to keep monetary policy unchanged."
In the US, the Personal Consumption Expenditures for November will be released. It's a measure inflation, like the already-released CPI, which suggests inflation is easing in the US. But - like here - the labour market remains tight
In Canada, monthly GDP and retail sales data for October and the November CPI data will be released.
"We expect lower gas prices, base effects, decelerating goods inflation owing to easing supply chain pressures to be contributing factors. Risks are skewed to a softer print given the downside surprise to the US CPI".
2023, 24 outlook: inflation, interest rates, wages to 4.5%
By Daniel Ziffer
Westpac's chief economist Bill Evans has put out a report on what he thinks will happen next year and in 2024.
Yes, more 'Avatar' films, but that's not the core of it.
He sees central banks remaining resolute on their fight against inflation in in 2023 and tips the RBA's cash rate will hit 3.85pc (from the current 3.pc) by May.
Why? Inflation is still high and the Reserve Bank has very few levers to pull other than raising interest rates.
Forces we expect will require that higher rate by May include evidence of very high inflation prints for both the December and March quarters. Our current forecasts are: 7.5% for the December quarter (6.7% underlying) and 6.6% for the March quarter (6.5% underlying)
These guesses show inflation slowing down, which Mr Evans thinks will mainly be because of easing supply side pressures.
But he expects the RBA board to be "cautious" due to wage increases intensifying in the first half of next year.
Convincing evidence that wages are lifting quickly will also be apparent by the May meeting with wages growth on the way to a 4.5pc peak by the June quarter. Only the December quarter Wage Price Index report will be available by the May meeting – and is expected to show a forecast 3.6pc (for the year) gain up from 3.1 pc a year in September – but this will be enough to unnerve authorities given anecdotal evidence of ongoing pressures and still historically low unemployment.
The good news for people with mortgages is Mr Evans sees rates coming down. The bad news is it's unlikely until 2024.
As we move into 2024, ongoing evidence of a stalling economy and rising unemployment, coupled with a slowdown in wage pressures and the inflation rate edging back towards 3pc, will allow the RBA to begin to cut the cash rate back towards the ‘neutral zone’ which we believe is 2.5–3.0pc. We anticipate around 100 (basis points, essentially a full percentage point) of cuts in 2024 from the March quarter pushing the cash rate to 2.85pc by year’s end
Gold mine for mercenaries
By Michael Janda
Russian mercenary group Wagner is alleged to have been granted a gold mine in Burkina Faso in return for its military assistance to that nation's government.
Ghana's President Nana Akufo-Addo made that claim about neighbouring Burkina Faso during his visit to the United States, where he is attending the US-Africa summit.
Speaking about the growing violence linked to Al Qaeda and the Islamic State group in the West African region, Mr Akufo-Addo said Burkina Faso allocated a mine to the Wagner Group as a form of payment for its deployment of fighters in the country.
"To have [Wagner] operating on our northern border is particularly distressing for us in Ghana," Mr Akufo-Addo said while standing with US Secretary of State Antony Blinken at the summit.
You can read more here:
Market snapshot at 12:45pm AEDT
By Michael Janda
- ASX 200: -0.3% to 7,181
- All Ords: -0.3% to 7,368
- Aussie dollar: 67.00 US cents
- On Wall St: Dow -2.3%, S&P 500 -2.5% , Nasdaq -3.2%
- In Europe: Stoxx 600 -2.9%, FTSE -0.9%, DAX -3.3%
- Spot gold: Flat at $US1,777/ounce
- Brent crude: +0.3% at $US81.46/barrel
- Iron ore: +3.1% to $US113.15/tonne
- Bitcoin: Flat at $US17,388
Markets at midday
By Daniel Ziffer
Here's what's happening on the markets at midday.
The broad All Ordinaries index covering the fortunes of the biggest 500 companies on the ASX is down 0.55pc in morning trading. It's at 7,350.00 points.
The ASX 200 is down 0.57pc to 7,163.80 points.
The Australian dollar is trading 0.03pc higher at 67.03 US cents.
ING hit with wet lettuce leaf
By Daniel Ziffer
Global bank ING made a 1.3 billion Euro profit in the most recent quarter and has been hit with the maximum possible fine for four breaches of Australian law: $53,280.
I think it'll be okay.
Competition watchdog the ACCC alleges ING Bank missed "three important legislated deadlines" and made a "misleading statement to consumers on its website" about the Consumer Data Right (CDR) rules.
What's it about? It's called 'open banking' and it lets customers more easily shift between banks.
Because ING is not listed in Australia, the maximum fine for each infringement is $13,320. If it was on the stockmarket here the maximum fine would be $133,200 per offence.
Here's an article explaining open banking.
Big movers, losers, at ASX opening
By Daniel Ziffer
At the opening of trade, some big jumps and falls off the US lead.
Trading opens, ASX 200 falls more than 1%
By Daniel Ziffer
Following the lead of a slumping Wall Street and a negative trend on the futures market, the key Australian index, the ASX 200, has dropped a full percentage point in value in opening trade.
The ASX 200 is an index that measures the value of the 200 largest listed companies on the Australian stock market.
NAB AGM underway
By Daniel Ziffer
One of Australia's 'Big Four' banks, NAB, is holding it's annual general meeting today. It's the first 'in-person' event in two years, due to COVID making the past couple online-only.
Directors Kathryn Fagg and Douglas McKay have been re-elected on proxies from investors.
If you haven't been to a big corporate AGM, they often give shareholders in the room a device like a TV remote that lets you vote on resolutions. But it's a joke really.
Chair Phil Chronican secured 98 per cent of the vote from proxy votes lodged by big institutional investors ahead of the meeting.
Even if everyone in the room voted him out it wouldn't shift the dial more than a fraction of a per cent.
Managing director and CEO Ross McEwen has told shareholders the bank is in good shape.
As we look to the year ahead, we expect to continue to have very low unemployment and robust business conditions, though they will be slower than 2022. As I mentioned earlier, clearly there are headwinds and the economy is slowing, but we still expect growth
NAB shares closed at 30.79 last night.
Good news: that's up 7 per cent from a year ago.
Bad news: It's $11 less than they were worth in 2007, which is... 15-years ago.
Why are global markets tanking?
By Daniel Ziffer
Head of FX strategy at NAB, Ray Attrill, has some interesting commentary on the big moves today.
Basically, there was a ‘risk-off’ reaction to the Fed's interest rate hikes on Wednesday.
Retail sales fell by 0.6% m/m in November, the largest fall in 11 months, and ex auto and gas sales fell 0.2%. After adjusting for inflation, the figures are even weaker. Industrial production fell 0.2%, boosted by higher utilities, with manufacturing production even weaker at minus 0.6 m/m. The Empire (New York State) Manufacturing, admittedly a small survey, was very much weaker than expected at -11.2 from 4.5 last month, while the Philly Fed index rose to -13.8 against a rise to -10 expected, with new orders slumping to -25.8.
Philly represent! Oh, hold on... it's way down.
Then that was "greatly exacerbated" by the messaging out of the European Central Bank's (ECB) meeting.
Rates were raised by 50bps as expected but the Governing Council warned of ‘significant’ rate rises still to come and President Lagarde later made clear that meant further 50-point moves were to be expected and that the market needed to adjust its pricing for the ECB’s terminal rate higher (it has).
And the boss had something to say too...
ECB President Lagarde didn’t mince words, saying “anybody who thinks that this is a pivot for the ECB is wrong…we should expect to raise interest rates at a 50bps pace for a period of time ” and compared the outlook to the Fed, where she said the ECB “had more ground to cover”, implying that she saw the policy rate needing to be raised by at least another 100bps, after the Fed’s projection of 75bps more. On top of this, quantitative tightening will begin from March at an initial rate of €15b per month until the end of June, with the pace after that yet to be determined.
Kennett slammed by independent reviewer
By Daniel Ziffer
Rare that you see a former premier taken to task for "flawed" decision-making and failing to comply with a government watchdog's directions.
Even rarer that the whole incident — including not handing over requested files — leads the independent supermarket reviewer to refer the whole debacle to the ACCC for investigation and call for more powers including fines.
But in the career of former Victorian premier Jeff Kennett, there's been some bruising encounters with independent regulators and this is one more.
Mr Kennett disputes the findings of our independent supermarket watchdog.
The story is wild.
I know because it took hours of calls, emails and back-and-forth yesterday.
(This GIF is taken from our work CCTV).
You can read the report on the link below
Here's what happening at 7.30am AEDT
By Daniel Ziffer
- ASX SPI 200 futures: down 1.12pc
- Australian dollar: down 2.36pc to 67.01 US cents
- On Wall St: Dow Jones fell 2.67pc, S&P 500 slipped 2.83pc, Nasdaq slumped 3.45pc
- In Europe: STOXX down 2.85pc
- Spot gold: US$1777.77
- Brent crude: down 1.8pc to US$81.22
- Bitcoin: US$17442
ASX set to slump, futures point to 1%+ drop, after Wall Street slump
By Daniel Ziffer
Good morning!
Daniel Ziffer from the ABC business team here with you on what might be a tough end to the trading week.
The ASX is set to fall 1.1 per cent if you believe the futures market, after big drops in the US overnight.
Check out the key US indicies:
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The Dow Jones Industrial Average fell 2.67pc, to 33,060.08;
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The S&P 500 slipped 2.83pc to 3,882.4
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And the tech-loaded Nasdaq slumped 3.45pc, to 10,785.97.
It's my first day on the blog, so stay tuned for exquisite business information and multiple technical stuff-ups.
