Jessica Amir
Market Strategist
Summary: In today video; CPI falls in line with expectation, supporting a downshift in Fed hikes. The Nasdaq 100 rallies for the 5th day in a row. Ahead of Australia’s company reporting season kicking off next month, we think we could likely see many commodities companies upgrade their outlooks for 2023, expecting higher earnings as many resources prices have quickly entered bull markets amid China easing restrictions sooner than expected. In Australia and Asia today focus is on risk-on assets, Oil, Iron Ore and Copper charging. In FX watch; the Australian dollar is on the heels of 0.70 US. What is next?
Friday January 12 2023
A Fed downshift looks to be on the cards with consumer prices rising 6.5% in the 12 months through December, which is the slowest pace in a year. While the core number (which the Fed looks at) showed price growth slowed to 5.7% yearly. Month-on-month though, CPI fell 0.1%, while core rose 0.3%. All the results matched expectations. As a result, US stocks posted gained, bond yields slumped. The Nasdaq 100 (USNAS100.I) rose for the fifth session, up 0.5%, closing above its 50 day moving average for the first time since November. When the index crossed above the 50DMA in November the Nasdaq rallied 5% to a new high, before turning lower. However this time, could things be different...as more evidence has been coming in of a US soft landing. US jobless claims unexpectedly fell to 205,000 from a revised 206,000 the previous week, while continuing claims also surprisingly improved
The Australian share market (ASXSP200.I) opened 0.8% higher, with most other Asian markets to open in the positive (according to their futures). Ahead of Australia’s company reporting season kicking off next month, we’re thinking we could likely see many commodities companies upgrade their outlooks for 2023, expecting higher earnings as many resources prices have quickly entered bull markets amid China easing restrictions sooner than expected. However today, eyes will once again be on commodities and affiliated equites; as the Oil price jumped for the 6th day, moving up to $78.30, after rising 1.1%, The Copper price rose 0.1% to $4.17 on the Comex market in New York, Iron ore (SCOA) is 0.6% up at $123, a new 6-month high.
After US CPI data showed US prices have continued to fall, the US dollar vs the AUD continued to fall, taking its fall from its peak to 10%. Inversely, Australia's trade balance data released yesterday, as well as Aussie retail and Aussie CPI earlier in the week, plus the all-important easing of China’s restrictions sooner than expected, all support upside in the AUD. As such the Aussie versus the US rallied to new four-month highs, 69.67 US. The next resistance level, the psychological 70.00 US is the next hurdle to get over. Aussie home loan data released today is the next catalyst to watch. If it’s stronger than expected, the AUDUSD could march on up.
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2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.