Market Digest Monday 13 Dec; what to expect from The Fed this week, QLD border reopens, big banks in focus

Market Digest Monday 13 Dec; what to expect from The Fed this week, QLD border reopens, big banks in focus

Equities 4 minutes to read
Jessica Amir

Market Strategist

Summary:  Has the Santa rally began or will Fed tapering tip markets into Sin city. The ASX200 rose for the first time in 6 weeks up 1.6% on week, the US benchmark rose 3.8% on week, up for first time in 4 weeks, Oil rose 8% on week, up for first week in 8 weeks, above its 15 DMA. But could the US Fed potentially doubling tapering put markets into a spin. Do not forget the ECB, the BoE and BOJ meet too, Queensland borders reopen after five months, WA to announce reopening plans and global superyacht vessel under construction hit a record high.


Three of the big four ASX banks (WBC, ANZ, NAB) hold their AGMs, plus agriculture will be put in the spotlight as Elders and Incitec Pivot hold their AGMs. Plus see the most traded instruments at Saxo Markets Australia.

Firstly- What to watch as The Fed meets

Tapering and taking money out of the economy will be front and centre this week, with US Fed meeting to discuss interest rates, as well as the ECB, the BoE and BOJ. Inflation has spiked to a 39-year high and employment has grown, while the global economy recovered from last year’s 4.7% drop in real GPD to 5% growth in 2021. So this week Fed’s meeting is critical watch as the Fed been given a mandate by the White House to fight inflation (for the second time in history). And we know Friday’s US inflation print, showed CPI hit its highest level since 1982, rising 6.8% in November YOY. This means, the Fed could hike official rates sooner than expected. So what's next?

As pointed out in our Saxo Market Call, the Fed may double the pace of tapering from $15 per month to $30 billion, which could imply Tapering ends March 2022 (instead of mid-year), which removes the pandemic-era bond buying support scheme. This means the Fed could then enter an ‘increase rate increase cycle’, and look to increase official interest rates from April onwards (and potentially rise official interest rates a total of three times in 2022).

This means, liquidity will be removed from the market, impacting the economy, slowing spending and property price growth. For stocks, high growth and interest rate sensitive stocks (companies that have large debt) and lower serviceability could be hit. These must be watched. As our CIO pointed out, the market could stay in a 5% range until the future of tapering/rate hikes has been paved out. However, if we do see rates hiked in March, there’s a 30% probability equities fall 30% from their high.

For now, keep eye on volatility, the CBOE Volatility index has fallen to a one-month low, while the S&P500 has closed at a new all-time high, despite the the cost of living rising to its fastest pace in nearly 40 yearsTINA is driving markets high, but markets are on edge. 

Secondly, what else to watch, Australian analyst rating changes and the most traded

  • Aurizon (AZJ AU): Aurizon Reinstated Underweight at JPMorgan; PT A$3.10
  • Most traded at Stocks/CFDs at Saxo Markets Australia last week: FMG, FLT, TSLA, SPX500
  • Most traded Futures at Saxo Markets Australia last week: GOLD
  • Most traded FX at Saxo Markets Australia last week: AUDUSD

Thirdly  - what else to watch this week

  • Investor Briefings: Ramsay Health (RHC) sees FY capital expenditure A$900M to A$1.10B. Crown Resorts (CWN): Scheduled to Host Investor Day.
  • Annual General Meetings: Tuesday 14th: HUB, Wednesday 15th WBC, Thursday 16th: ANZ, ORI, ELD. Friday 17th: NAB, NUF, IPL  
  • Investor Roadshows: NewsCorp Tuesday 14th Dec
  • Large increase in total short positions: Allkem, CSL, Xero (Bloomberg).
  • Largest decrease in short positions: Aristocrat Leisure, Ampol, Fletcher Building (ASIC, Bloomberg)

Companies in the news:

  • AGL Energy (AGL AU): Rise of Solar Rooftops to Accelerate Coal’s Exit in Australia
  • Ansell (ANN AU): Affirmed at Baa2 by Moody’s
  • Fortescue (FMG AU): Aug 2006 HY Bond Trading 5x Average; Iron Ore’s Tumble Proves Headwind for Some Miners
  • Macquarie Group (MQG AU): China’s Wanda to Honor Guarantor Role, Pay Macquarie in Oil Deal
  • Qantas (QAN AU): Set to Order More Than 100 New Jets for About A$5b: SMH
  • Rio Tinto (RIO LN): Glencore Shows Rio Tinto That Diversification Matters: Chart; Serb Protesters Demand Blanket Ban on Rio Tinto Lithium Project
  • Santos (STO AU): Talks Up PNG Gas Expansion, Low-Emissions Fuel, Carbon Capture Amid Growth Options: AFR

Economic news to watch this week

  • Australian eco news: Business confidence out Tuesday. Consumer confidence out Wednesday, (prior 105.3), employment data out Thursday 16th (market expects 200,000 jobs to be added to In November, which will be a recovery from the 46,400 jobs lost in October), market expects unemployment to fall from prior 5.2% to 5%). If data is weaker than expected keep an eye on the consumer spending sector and financials which could be sold off.  
  • United State eco news: Fed Reserve meets Tuesday Wednesday, (market expects rates to hold 0.25%), US retail sales expected to show retail sales growth fell to 0.8% in November from 1.7% growth in October (if weaker than expected we could see markets pull back), building permits, house starts and manufacturing/services PMI out Friday
  • Chinese eco news: Industrial production out Wednesday (market expects to rise 3.8% YOY November, prior 3.5%) - watch iron ore and other commodity stocks. Chinese retail sales YOY for Nov (market expects to rise 4.9%, prior 4.9% growth).
  • New Zealand: Last week NZ’s economic pulse weakened as its manufacturing PMI fell to 50.6 in November from revised 54.2 in October, while credit card spending in Nov rose 9.1% (market expected 9.6%) – this is an important gauge and a flag that you could expect weaker NZ GPD this week of -1.6% YOY (data due 16th December)

Markets -  the numbers

  • US Major indices rose on Friday: S&P 500 gained 1%, Nasdaq up 0.7%, Dow up 0.6%
  • Europe indices closed lower: Euro Stoxx 50 lost 0.2%, London’s FTSE 100 fell 0.4%, Germany’s DAX fell 0.1%
  • Asian markets closed lower: Japan’s Nikkei fell 1%, Hong Kong’s Hang Seng slipped 1.1%, China’s CSI 300 lost 0.5%. Australia’s ASX200 fell 0.4%
  • Commodities: Iron ore fell 0.7% to $108.35. Gold rose 0.5% to $1,783, WTI crude rose 1% to  $71.67 per barrel. Copper fell 1.1%
  • Currencies: Aussie dollar trades lower at 0.7128 per US dollar (2-week high). Kiwi trades lower at 0.6792 per US dollar (holds above December low), Euro lower at 1.3166 per US dollar, Japanese dollar trades higher (holds 2-week high) 113.38 per US dollar.
  • Bonds: U.S. 10-year yield steady at 1.482%, Australia 10-year bond yield higher at 1.647%

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