What's Affecting Markets Today
Powell says it’s too early to say when rates will fall
Jerome Powell, the US Federal Reserve Chairman, indicated that the Fed might be done with rate hikes if the economy and inflation continue to cool. However, he maintained that further tightening could occur if necessary. Powell emphasized the need for caution before concluding that the current policy stance is sufficiently restrictive or speculating on policy easing. The Fed has raised rates significantly since March 2022, impacting demand across various sectors. Investors expect the next Fed move to be a rate cut, but officials are cautious about declaring victory against inflation. The Fed’s upcoming economic projections will provide insights into expected rate cuts in 2024 but not their timing.
Bitcoin hits $US40,000 for the first time since May 2022
Bitcoin reached $US40,000, a level not seen since May 2022, marking a significant rebound in 2023 with a 142% increase. This surge is driven by expectations of Federal Reserve rate cuts and potential demand from upcoming US spot Bitcoin ETFs. The crypto industry anticipates SEC approval for these ETFs by January. Despite recent regulatory crackdowns and industry turmoil, optimism around ETF approval and rate cuts has supported Bitcoin’s rally. However, Bitcoin and other cryptocurrencies like ether and BNB are still below their pandemic-era peak values.
Spot gold rises to record on dovish Fed remarks
Gold prices hit a record high, driven by expectations of early rate cuts by the Federal Reserve in the next year. Soft US economic data and dovish comments from Fed officials have led to increased investor interest in gold. Spot gold prices rose to $US2091.73 an ounce, surpassing the previous record set in August 2020 during the pandemic. This surge reflects a shift in investor sentiment, betting on rate cuts as the Fed adopts a more dovish stance in response to changing economic conditions.
ASX Stocks
ASX 200 - 7,127.9 (0.77%)
Key Highlights:
The Australian sharemarket experienced a positive surge in late afternoon trading, with the S&P/ASX 200 index rising 0.6% to 7119.1, influenced by expectations that global central banks might halt interest rate hikes. This optimism followed a strong performance in the New York market, where the S&P 500 gained 9% in November.
Key sectors contributing to this rise included miners, real estate, and technology stocks sensitive to interest rates. The materials sector, in particular, saw a 1.3% jump, with major companies like BHP and Rio Tinto gaining 1.5% each. Gold prices also soared, initially surpassing their August 2020 peak before reducing gains, positively impacting gold miners like Northern Star Resources and Newmont.
The information technology sector outperformed others, registering a 2.2% increase, with significant gains in companies such as WiseTech, Xero, and NextDC. However, energy stocks did not fare as well, with a decline in crude oil prices leading to drops in Woodside and Santos shares.
Investors are now focusing on the upcoming Reserve Bank’s interest rate decision, with expectations leaning towards maintaining the current cash rate. The probability of a rate hike by May 2024 has also diminished, as noted by AMP chief economist Shane Oliver.
In other market news, Origin Energy entered a trading halt after a 3.9% drop, following the failed $20 billion buyout proposal at a shareholders’ meeting. Metcash rallied after releasing positive interim results, while Pact Group saw a slight decline as Raphael Geminder extended his takeover bid. Endeavour Group’s shares rose after an upgrade by UBS, and Orora completed its acquisition of Saverglass, highlighting diverse movements across different sectors.
Leader
SGR-The Star Entertainment Group Ltd (+8.33%)
DYL-Deep Yellow Ltd (+6.16%)
GMD-Genesis Minerals Ltd (+5.63%)
AWC-Alumina Ltd (+4.93%)
PRU-Perseus Mining Ltd (+4.90%)
Laggards
STX-Strike Energy Ltd (-9.52%)
SYA-Sayona Mining Ltd (-8.87%)
SMR-Stanmore Resources Ltd (-8.82%)
WC8-Wildcat Resources Ltd (-6.71%)
CXO-Core Lithium Ltd (-4.63%)