Weekly market update - 18th of December 2023
Written and accurate as at: Dec 20, 2023 Current Stats & Facts
Equity markets demonstrated remarkable resilience as we navigated through another eventful week in the financial world. Central banks across Europe, the UK, and the US have unanimously maintained interest rates, signalling a possible peak. This, coupled with encouraging economic data from the US, fostered hopes for a soft landing scenario, mitigating fears of a severe economic downturn.
The Federal Reserve's revised 'dot plot' and accompanying commentary solidified market expectations of an imminent pivot towards rate cuts. The 'dot plot' forecasts a median expectation of 75 basis points of rate cuts in 2024. Yet, markets anticipate a more aggressive stance, pricing in over 130 basis points, with speculation of cuts commencing as early as March 2024.
Equity Market Highlights
The gains in the equity markets were widespread:
- The equal-weighted S&P 500 outshone the official index, marking a shift from the previous focus on the 'Magnificent Seven'.
- Australian markets mirrored this trend, with the S&P/ASX 200 registering a 3.4% rise, buoyed by the performance of Resources and Industrials.
- The S&P 500 in the US also enjoyed a 2.5% weekly gain, marking its seventh consecutive weekly rise.
Key Market Drivers
- Central Bank Policies: Central banks signalled a pivot away from tightening monetary policies, fueling investor optimism.
- US Economic Data: Inflation rates in the US are showing signs of cooling, aligning with market predictions and easing inflationary pressures.
- Australian Economic Indicators: Business confidence dipped, but consumer sentiment rose, painting a mixed economic picture. Employment figures exceeded expectations, suggesting a robust job market.
Macro/Economic Newsflow
- US Inflation: The annual inflation rate decelerated, aligning with forecasts.
- Australian Business and Consumer Sentiment: Business confidence declined post-rate rise, while consumer sentiment improved following the RBA's decision to hold rates.
- Employment Data: Surprising growth in employment numbers despite a slight increase in the unemployment rate.
- Job Market Trends: SEEK job ads showed a decline, indicating a potential easing in the labour market.
Major Share Price Movements – S&P/ASX 200
- Weebit Nano Ltd: +18.7%. A surge in investor sentiment despite no specific news.
- Credit Corp Group Ltd: +16.6%. Benefitted from the retracement in bond yields.
- Link Administration: +15.3%. Extended partnership with AustralianSuper, boosting investor confidence.
- Bellevue Gold Ltd: -6.1%. Fell as gold prices dipped.
- Megaport Ltd: -6.5%. Affected by internal financial arrangements.
- IDP Education Ltd: -13.2%. Impacted by potential changes in student visa laws and CFO's resignation.
Other notable movements included Vicinity Centres (+7.8%) and Mineral Resources Ltd (+6.9%), both riding the wave of market optimism, while NIB Holdings Ltd (-2.0%) and QBE Insurance Group Ltd (-2.2%) lagged, reflecting the underperformance of defensive stocks.