Summary: Watch our video in under five minutes or read the text for what’s happening in markets, what to watch; plus potential trading and investing ideas to consider.
ASX200 futures suggest the market will rally on Wednesday, and erase yesterday’s 0.5% fall. But short-term pressure has built up by the RBA indicating more hikes are needed. Coal prices are down 36% and picked up this week almost 7% after the Australia Energy Market Operator said coal supply and gas supply in Australia is short and will stay short till 2026, so we think the RBA could make upward revisions to underlying inflation forecasts on Friday, despite the Bank keeping its headline CPI, unemployment and activity forecasts broadly unchanged. For investors, this means volatility in the ASX200 could pick up on Friday - financials and insurers could be supported with the RBA seeing more hikes ahead. The services sector is already in contraction, yet the RBA sees GDP slowing to around 1.5% this and next year, expecting household spending to pull back amid tightening financial conditions, as the post-pandemic spending rush has eased. This means, consumer discretionary stocks likely face headwinds. On the flip side, the energy sector is being supported.
Crude oil (CLH3 & LCOJ3) supported by supply concerns, OPEC+ not raising output
Oil jumped 4.3% to $77.31 as investors grew more confident in China's demand outlook, while there are expectations OPEC+ won't raise crude output in 2023 amid uncertainty over Russian supply. The Bank of America also sees US shale oil production peaking in the next three to four years. For Saxo’s view, read out Quarterly Outlook.
Saxo launches in Q1 2023 quarterly outlook: The Models are Broken
Saxo’s quarterly outlook released argues that the economic models and assumptions of how market cycles are supposed to work are broken. We explore how this may affect both equities and commodities, as well inflation being higher-for-longer and how could it impact forex and crypto. Read the outlook here.
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