The Australian share market has opened lower after Wall Street succumbed to profit taking in illiquid markets before the last weekend of 2024.
We’ll bring you the latest on what’s happening on the markets throughout the day in our live blog.
Disclaimer: this blog is not intended as investment advice.
Key Events
Market snapshot
- ASX 200: -0.5% to 8,217 points
- Australian dollar: +0.2% to 62.26 US cents
- S&P 500 (Friday): -1.1% to 5,970 points
- Nasdaq (Friday): -1.5% to 19,722 points
- FTSE (Friday): +0.2% to 8,150 points
- EuroStoxx (Friday): +0.7% to 508 points
- Spot gold: +0.2% to $US2,624.03/ounce
- Brent crude: -0.5% to $US73.80/barrel
- Bitcoin: -0.9% to $US93,512
Price current around 10:40am AEDT
Live updates on the major ASX indices:
Business group slams new wage theft laws as ‘overreach’
Wage theft becomes a criminal offence on January 1 that is punishable with jail time.
But this only applies when Fair Work can prove the wage theft was “intentional”.
Despite this, one business lobby group has slammed the regulator’s new powers as an extra burden on business owners that want to do the right thing.
“We feel these new laws are an overreach,” the Australian Chamber of Commerce and Industry’s chief of policy and advocacy, David Alexander, said in a statement.
“[The new laws] will add yet another layer of complex and burdensome regulation on business, especially small business.
“We will be interested to see how many prosecutions will be made under these changes as employers want to do the right thing but are hampered with complex regulations.”
Read more here.
ASX trading down in early afternoon trade
Good afternoon, Emilia here with you for the rest of today’s live business blog.
The ASX 200 is still trading down around 0.4%.
The bottom stocks on the index are APA Group and Region Group which are both down almost 3.7%.
Any stocks or issues you’d like investigated today?
Send us a comment here or email me on terzon.emilia@abc.net.au with your story ideas.
Key Event
More than 80 per cent of Aussies could save on electricity: ACCC
More than 80 per cent of Australian households in the National Electricity Network (NEM) could move to a cheaper electricity plan if they shopped around or contacted their electricity provider, the ACCC’s latest electricity inquiry report has found.
Despite the price of electricity falling between August 1, 2023 and August 1, 2024, the ACCC said many households remain on offers priced above the government safety net price meaning they are missing out on lower prices.
The government safety net price is the price consumers are charged if they have never shopped around for another price.
“If you haven’t changed electricity plans in the past 12 months, chances are you are paying more for your electricity than you need to,” ACCC Commissioner Anna Brakey said.
The report found that households on offers which are more than a year old are paying $238 more per year than households on newer offers.
It also found that the size of this ‘loyalty penalty’ increases with the age of the offer (when examining three years of flat rate offer prices).
The ACCC suggests that to find a better deal, consumers can compare their current rates on the government comparison sites www.energymadeeasy.gov.au (for consumers in New South Wales, South Australia, Tasmania, the Australian Capital Territory and Queensland), and compare.energy.vic.gov.au (for consumers in Victoria).
Interest rate cut expected early 2025
Investors expect the Reserve Bank to start the interest rate-cutting cycle in its first policy meeting of 2025.
JP Morgan analysts told Reuters a quarter-point rate cut should come in February following the RBA’s December meeting minutes which showed the board believed the upside risks to inflation had dropped, while downside risks to the economy had strengthened.
Board members felt if data continued to align with, or fall below expectations, it would strengthen their confidence that underlying inflation is steadily moving toward the target range of 2-3%, which is what they want to see before announcing a cut.
Key Event
Asia shares dip as high yields test valuations
Asian shares edged lower in early trade as high Treasury yields challenged lofty Wall Street equity valuations while underpinning the US dollar near multi-month peaks.
Volumes were light with the New Year holiday looming and a rather bare data diary this week. China has the PMI factory surveys out on Tuesday, while the US ISM survey for December is due on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2%, but is still 16% higher for the year. Japan’s Nikkei eased 0.2%, but is sitting on gains of 20% for 2024.
South Korea’s main index KS11 has not been so fortunate, having run into a storm of political uncertainty in recent weeks, and is saddled with losses of more than 9% for the year. It was last off 0.35%.
S&P 500 futures and Nasdaq futures were both off 0.1%. Wall Street suffered a broad-based sell off on Friday with no obvious trigger, though volumes were just two-thirds of the daily average.
The S&P 500 is still up 25% for the year and the Nasdaq 31%, which is stretching valuations when compared to the risk-free return of Treasuries. Investors are counting on earnings per share growth of just over 10% in 2025, versusa 12.47% expected rise in 2024, according to LSEG data.
Yet yields on 10-year Treasuries are near eight-month highs at 4.631% and ending the year around 75 basis points above where they started it, even though the Fed delivered 100 basis points of cuts to cash rates.
“The continued rise in bond yields, driven by the reassessment of less restrictive monetary policy expectations, creates some concern,” said Quasar Elizundia, a research strategist at broker Pepperstone.
“The possibility that the Fed may keep restrictive monetary policy for longer than expected could temper corporate earnings growth expectations for 2025, which could in turn influence investment decisions.”
Key Event
ASX down
The Australian share market has opened lower, tracking a broad-based sell-off on Wall Street.
The ASX 200 was down 41 points or 0.5 per cent to 8,220, by 10:30am AEDT.
Ten of the 11 sectors were trading in the red, led by utilities (-1.8pc) and industrials (-1.4pc).
Here are the top and bottom movers at open.
Key Event
‘Taking the trade to the bitter end’
Here’s a note from market analyst Chris Weston from Pepperstone about what to expect in stock markets this week and why they are “taking the trade to the bitter end”.
For those still active in markets, the new week brings pockets of notable event risk, as well as further poor liquidity conditions, which could result in exacerbated price moves. However, this week is less about rationalising the ‘why’ behind the market moves and more about recognising that the crosscurrents from remaining end-of-year portfolio flows will be the likely driver of price action.
As such, we continue to search for high-probability set-ups and react to what the markets put in our path, with the strategies deployed and our approach to managing risk determined by the compression/expansion in the ranges, volatility and intraday direction.
The ‘surprisingly’ outsized sell-off on Friday in the respective US equity indices was a clear example of not overthinking the ‘why’. Where despite a 1.1% decline for the S&P500 there was no obvious smoking gun or trigger to fundamentally justify such a broad-based sell-off in US equity.
There was talk doing the rounds of rebalancing flows notably from mutual funds, which have strict end-of-month/quarter rebalancing mandates. This makes sense – however, given the sell-off in US Treasuries through Q424, these same players should have also been buyers of US Treasuries to rebalance the fixed income leg of the portfolios. That aspect wasn’t obvious, with UST 5yr to 30yr yields 3bp-5bp higher on Friday.
Some have also suggested that the broad sell-off seen in USTs, JGBs, UK gilts and German bunds on Friday was a factor weighing on equity risk, as it was for gold and silver.
US 10yr Treasury vs Citi US economic surprise index – the recent move higher in yield is not backed by the data.
ICYMI: Dan Ziffer’s Finance Report
Key Event
‘Profit-taking across the board’
Wall Street’s holiday cheer ended abruptly on Friday, with all three main benchmarks closing lower in a broad-based sell-off affecting even tech and growth stocks that had driven markets higher through much of the shortened trading week.
The decline ended the Dow Jones Industrial Average’s five-session winning streak that had followed a 10-session decline, its worst losing stretch since 1974.
“Today feels like there is quite a bit of profit-taking across the board,” said Michael Reynolds, vice president of investment strategy at Glenmede.
“We are more than two years into a pretty strong bull market … so it’s really not surprising to see some people taking their profits and rebalancing their portfolios ahead of the new year.”
Highlighting the profit-taking theme, the 45 top performers year-to-date on the S&P 500 all finished lower on Friday.
The sell-off thwarted the seasonal Santa Claus rally, in which stocks traditionally rise during the last five sessions of December and the first two of January. Since 1969, the S&P 500 has climbed 1.3% on average, according to the Stock Trader’s Almanac.
Thursday’s session hinted at momentum stalling, with both the S&P 500 and Nasdaq posting marginal losses to end multi-session winning runs.
Rising US Treasury yields had been catching investors’ attention, with the benchmark 10-year note hitting a more than seven-month high in the previous session. The yield hovered close to that mark on Friday, at 4.63%.
Higher yields are seen as hampering growth stocks, as they raise borrowing costs for business expansion. These stocks, especially the so-called Magnificent Seven technology megacaps which had been key drivers of the market’s 2024 rally, were also caught up in Friday’s sell-off.
Key Event
ASX to open lower
Good morning and welcome to Monday’s markets live blog, where we’ll bring you the latest price action and news on the ASX and beyond.
A tumble on Wall Street on Friday sets the tone for local market action today.
The Dow Jones index dropped 0.8 per cent, the S&P 500 lost 1.1 per cent and the Nasdaq Composite down 1.5 per cent.
ASX futures were down 29 points or 0.4 per cent to 8,228 at 7:30am AEDT.
At the same time, the Australian dollar was down 0.1 per cent to 62.09 US cents.
Oil prices firmed on Friday as investors awaited news of economic stimulus efforts in China, the world’s biggest crude importer.
Brent crude futures rose 0.7 per cent on the day to $US73.75 a barrel, and was 1.1 per cent higher for the week.
Spot gold dipped 0.7 per cent to $US2,615.54 per ounce at the end of last week.
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