Weekly market update - 26th of June 2023
Written and accurate as at: Jun 26, 2023 Current Stats & Facts
The past week saw a reality check for global markets posting solid gains recently. Stubbornly high inflation drove the Bank of England to hike rates more than expected, igniting fears of a recession across the developed world. The ripple effect was felt in the US, with the S&P 500 falling 1.4% for the first time in six weeks, snapping its longest winning streak since November 2021. The NASDAQ was not spared either, dropping 1.4% for the first time since May.
Back home in Australia, the ASX 200 mirrored this downward trend, declining 2.1%. The most substantial hits were absorbed by the Resources sector (-4.2%) and Small Caps (-3.5%), while sectors known for their lower volatility, like consumer staples and utilities, garnered support as investors sought safe havens amidst the turbulence.
The minutes from the Reserve Bank of Australia (RBA) indicated that the June decision to increase rates was "finely balanced", owing to significant uncertainty around the outlook for household spending. Inflation remains a paramount concern, and the recent rebound in house prices is under the regulator's radar.
As we gazed at the US, all three major averages broke their multi-week winning streaks. Apple, a standout performer amid broader weakness in the technology sector, reached new all-time highs on Friday.
While inflation dominated UK discussions, leading to the Bank of England surprising markets with a 0.5% rate hike to a 15-year high of 5%, fears abound that the UK is teetering on the brink of a recession.
In economic news, the UK inflation result for May was unsettling for markets, with the Consumer Price Index (CPI) at 8.7%, considerably higher than the forecasted 8.4%. Furthermore, US durable goods orders will be under scrutiny this week, with predictions of a 1% decrease in May from a 1.1% rise in April.
Closer to home, Australian data will be of interest towards the end of the week, with the release of figures on May CPI, private sector credit aggregates, and retail sales. We will also be watching for Core Logic's house price data for June, with a predicted increase of 1.1%, expected to keep the RBA alert.
Turning to ASX 200 movements, notable winners and losers included Endeavour Group (+5.2%), showing strength throughout the week as defensive stocks outperformed, and AGL Energy Ltd (+4.3%), finding support after upgrading its FY24 EBITDA and NPAT guidance. On the downside, Gold Road Resources plummeted 13.7% after downgrading its production guidance at Gruyere, and Lake Resources plunged 37.9% following a disappointing operational update for its Kachi brine project