Closing Bell
What's Affecting Markets Today
Iron Ore Climbs Amid China’s Property Sector Stimulus
Iron ore futures saw an uptick, driven by stimulus in China’s property sector and decreased shipments. The January iron ore on the Dalian Commodity Exchange rose by 0.3%, nearing a two-year high, while Singapore Exchange’s benchmark December iron ore dipped slightly by 0.8%. This rise aligns with China’s commitment to bolster its property market and meet housing demands, as stated by Minister Ni Hong. Despite the stimulus efforts, including reduced bank reserve ratios, China’s bank lending in October fell less than expected, reflecting ongoing efforts to stabilize the economy.
Consumer Sentiment Deteriorates with Rising Interest Rates
Consumer sentiment in Australia significantly dropped in November, as evidenced by the Westpac-Melbourne Institute Consumer Sentiment Index’s fall to 79.9, a notable decline from October’s 82. This drop is attributed to the recent interest rate increase, igniting worries about higher living costs and potential further rate hikes. According to Westpac’s Matthew Hassan, this pessimism is heavily influencing spending attitudes and long-term economic outlooks, with the sub-index for the five-year economic forecast hitting a one-year low. The mood points towards a cautious spending approach for the upcoming Christmas season.
UBS Predicts Significant Fed Rate Cuts in 2023
Strategists at UBS Investment Bank predict a substantial 275 basis point reduction in US Federal Reserve interest rates next year, a contrast to the modest 75 basis point cut expected by money markets. They foresee rate cuts starting as early as March 2023 due to declining inflation, expecting real rates to be notably high by then. The Federal funds rate is predicted to drop to between 2.5% and 2.75% by the end of 2024 and reach a terminal rate of 1.25% by early 2025, with a recession anticipated in the US by the second quarter. This forecast is based on historical central bank trends outside Japan, which have typically seen significant rate cuts during easing cycles.
ASX Stocks
ASX 200 - 7,006.7 (0.83%)
Key Highlights:
Today, the ASX experienced a robust rally, with the S&P/ASX 200 Index opening 0.8% higher, buoyed by a rebound in commodity prices and anticipation of key US inflation data. Most sectors showed gains, particularly energy and materials, while utilities lagged.
The market largely overlooked the negative sentiment from the Westpac-Melbourne Institute consumer survey, which indicated a sharp drop in mood following recent interest rate increases. Mining giants like BHP Group, Rio Tinto, and Fortescue saw their shares rise by over 1% each, fueled by consecutive gains in iron ore futures and optimism about China’s property sector. Gold and lithium producers also saw an uptick.
Among major banks, Commonwealth Bank stood out with a 0.9% increase after announcing a 1% rise in statutory profit to $2.5 billion for the September quarter. In contrast, National Australia Bank fell by 2.6%. Telstra modestly climbed by 0.4% following its earnings confirmation.
On Wall Street, indices had a cautious session ahead of the US consumer price index data, with mixed results across major benchmarks. US inflation is expected to slow down, influencing Fed fund traders’ expectations of interest rate holds and potential cuts in the coming year.
In other notable movements, OFX Group dropped 8.5%, despite a profit increase, and ALS jumped 6% despite a profit drop and lowered guidance. Telix Pharmaceuticals gained 2.1% on acquisition plans, while Bank of Queensland advanced 0.5%. Origin Energy declined by 1.7% amid its ongoing takeover saga. Additionally, several companies, including Goodman Group and Beach Energy, are scheduled to host their AGMs, with NAB shares trading ex-dividend.
Leader
ALQ-Als Ltd (+9.18%)
LFG-Liberty Financial Group (+7.44%)
360-LIFE360 Inc (+6.07%)
BPT-Beach Energy Ltd (+5.67%)
CTT-Cettire Ltd (+5.44%)
Laggards
APM-APM Human Services (-8.44%)
ERA-Energy Resources of Australia Ltd (-5.56%)
SKC-Skycity Entertainment Group Ltd (-4.40%)
MCY-Mercury NZ Ltd (-3.70%)
NAB-National Australia Bank Ltd (-3.01%)
Calendar
Economic
