Weekly market update - 3rd of July 2023
Written and accurate as at: Jul 03, 2023 Current Stats & Facts
Global Markets in the First Half of 2023: An Overview
The first six months of 2023 concluded much as they began, with investors maintaining a positive perspective on growth and inflation data emanating from the United States. Notably, many sectors that underperformed in 2022, particularly the technology sector, rebounded with vigour. The NASDAQ, in particular, surged by 32%, marking its best first half since 1983. The S&P 500 also performed commendably, recording a 16% rise.
In Australia, several rate-sensitive sectors, including REITs, Technology and Consumer Discretionary stocks, were boosted following a dip in headline inflation in May. Despite the persistent cost of living pressures, which remain the focal point of domestic media discourse, these sectors may experience additional respite as the Reserve Bank of Australia (RBA) grapples with a challenging interest rate decision. Factors such as robust retail sales, a resurgence in house prices, and lagging productivity hint towards a potential need for a rate hike. However, declining inflation and mounting evidence of economic stress could offer consumers a reprieve.
With the financial year closed for most companies, attention will shift towards the upcoming reporting season to glean further insights into the domestic economy.
Key Market Drivers and Macro/Economic Newsflow
Global markets responded optimistically to key US data last week, making significant gains in most developed markets. The uplifting sentiment was largely fuelled by a substantial upward revision to first-quarter GDP growth figures, increasing to +2% from +1.3%.
Major Wall Street indices surged over 2%, maintaining their recent momentum. The NASDAQ concluded a robust June quarter with a rise of 12.8%, while the S&P 500 registered an increase of 8.3%. Such moves further underscored the market's strongest start since 2019 for the S&P 500 (+15.9%) and the best in 40 years for the NASDAQ (+31.7%).
Technology stocks again played a significant role, spurred by favourable inflation news from the Fed's preferred PCE Index (+0.3% vs +0.4% expected). A notable development was Apple's valuation exceeding $3 trillion for the first time, surpassing the valuation of 5 of the S&P 500’s 11 sectors.
The Australian market also participated in this upswing, with the ASX200 up 1.6% in aggregate, led by REITs (+4.6%), Info Tech (+4.5%), and Consumer Discretionary (+2.8%). Domestic inflation dropped by -0.4% in May, a development that resulted in rate-sensitive sectors making a notable recovery.
In other macroeconomic news, the US saw positive unemployment data, with weekly jobless claims decreasing significantly in 20 months. The Australian inflation rate fell from +6.8% in April to +5.6%, retail sales annualised at +6.5% (the fastest since 2022), and national house prices rose +3.3% in the last 3 months.
Major Share Price Movements
Among the significant share price movements within the S&P/ASX 200 were Collins Foods Ltd, which saw a 23.8% rise in share price, and Lendlease Group, which enjoyed a 10.7% increase. Conversely, Bega Cheese Ltd experienced an 18.8% drop, while Link Administration Holdings fell by 11.6%.