Economic and market news
This is the final market update for the year. A happy new year to everyone, we look forward to keeping you up-to-date again from 1 February 2023!
In macroeconomic terms, 2022 has been the year of central banks ‘catching up’. Most were wrong footed by the surge in inflation that was sparked by the war in the Ukraine, but which ignited the long awaited resurgence of price and wage rises in most developed countries. Going into 2023, the focus is on how hard the economic landing is going to be off the back of the unprecedented pace of monetary policy tightening so far. The Federal Reserve has slowed the pace of rate rises and slashed its economic growth forecasts for next year, but it is expecting to avoid recession. In Australia, inflation, growth and jobs data all show significant momentum in the economy. The pause over the summer (there is no policy meeting for the Reserve Bank of Australia in January) and refreshing of forecasts in February will give the policymakers and markets a chance to draw breath and reassess.
Market roundups and projections suggest a profit decline in 2023 that could be akin to that experienced in the Global Financial Crisis.
Meanwhile, the climate transition, including the policy, supply chain, and inflationary consequences of the investment needed to collectively achieve it across the globe, and meet 2030 and 2050 targets, is also very high on the agenda for markets in 2023.
Looking at Australian economic and market news this week, labour force data for November saw the unemployment rate hold steady at the 48-year low of 3.4 per cent. Employment grew by 64,000 in the month, more than three times what the market expected.
New data on US inflation was said to be the strongest evidence yet that price pressures have finally peaked. November saw the smallest increase in prices (0.2 per cent) since August 2021. However, with headline inflation still running at 7 per cent annually, it was suggested that it will be some time before monetary policy could be eased.
Market expectations of a slowing in the trajectory of monetary policy tightening, thanks to the deceleration in inflation, were played out. The Federal Reserve raised its official interest rate target band by 0.5 percentage points, to 4.25 to 4.5 per cent (compared with 0.75 percentage points at recent meetings). Alongside this, they ‘slashed’ economic growth forecasts, but were said to be expecting that the United States would avoid recession.
The Bank of England and European Central Bank also raised rates by 0.5 percentage points at their meetings this week. In common with the US, UK inflation data slowed slightly (10.7 per cent in November down from 11.1 per cent in October), with similar hopes that it has seen the peak in inflation.
Australian indices
ASX 200: Fell 2.48 per cent, over the week, to 7024.3 points at the close on Tuesday.
All Ordinaries: Also fell, 2.57 per cent in the past week, closing at 7199.6 points on Tuesday.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
0.25
|
94.44 |
3.26% |
+9 |
+15 |
+266 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.75 |
96.99 |
3.41% |
+13 |
+7 |
+211 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
1.75 |
83.73 |
3.72% |
+20 |
+12 |
+219 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
90.47 |
4.03% |
+20 |
+5 |
+218 |
Reserve Bank of Australia (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
3.10 |
+0.25 (6 December 2022) |
+0.25 (6 December 2022) |
0.10 |
Currencies(source:RBA)
As at the close on 20 December, AUD/USD had fallen 1.42 per cent, on last week, to 0.6659. The AUD/RMB also fell, 1.33 per cent, in the week to 4.6521.
Commodities
Gold market analysts suggest that looming recession could spark price rises that could see the metal reach as high as $1900 an ounce, as investors seek safe haven assets.
Venture Capital
BioScout
Stoic investee BioScout has announced that it has delivery the first of its new upgraded devices to the first customers.
Ferronova
Stoic investee Ferronova announced that Professor Benjamin Thierry has received aNational Health and Medical Research Council (NHMRC) Development Grant to improve radiotherapy treatment for brain tumours. This grant will pave the way for FerroTrace-FAPi to be commercialised and used in proton beam therapy with Ferronova.
Uniseed
Stoic’s investment partner Uniseed looked at the highlights of its year, including the achievements of many of their joint investees.
Property
This week was the last of the ‘property year’. Auction clearance rates fell again, to a five month low. Auction volumes were also down on last week, to almost half the level of the same time last year.
