After reaching new all-time highs yesterday, the ASX has taken a breather today, with the benchmark ASX 200 pulling back 1.22% with all 11 market sectors ending the session in the red. Financials were the worst of the lot, down 1.79%, followed by steep losses in Real Estate and Industrials.
The falls on the local market followed losses on Wall Street overnight after US Federal Reserve chair Jerome Powell indicated the central bank was unlikely to cut rates in March unless inflation fell further, paring back widely held expectations that the US would see a rate cut next month.
December CPI commentary
Locally, yesterday’s promising CPI data — in which December quarter inflation figures came in lower than expected — prompted a number of brokers to speculate that we’ve seen the last of this cycle’s rate cuts.
Comments from Citi included: “With the CPI moderating more quickly than expected, we close the door on our view that the peak of the cash rate cycle would be 4.60%. Instead, our modal view is now 4.35%
“Sticky services inflation, pending income tax cuts and rising house prices argue against a February turn in guidance from the RBA Board.
“We continue to expect 50 basis points worth of cuts this year, with 25 basis points in Q3 and Q4 for 3.85% by the end of the year.”
UBS said: “Headline CPI…notably below our forecast and consensus...and well below the RBA forecast. UBS now sees first cut in August.”
Morgan Stanley (NYSE:NYSE:MS) commentary included: “Inflation path is likely to be revised down at their [RBA’s] February meeting next week.
“There still looks to be some stickiness in CPI categories the RBA has flagged previously (services, non-tradables).
“We expect that the RBA will be on hold through 2024, and start easing in February 2025.”
Making headlines
- IGO Ltd closed down 4.5% on news it has been served a legal claim by South32 demanding it pay back an estimated $122 million in royalties owed to it from mining operations at the Tropicana Gold Mine in West Australia. IGO dismissed the claim and says it will defend.
- Nufarm lost 1.08% after warning of a “challenging” first half.
- Foreshadowing ongoing activism impacting its Barossa project, Santos (-1.27%) says it will invest up to $10 million in coastal Aboriginal communities, including the Tiwi Islands, home to traditional owners who unsuccessfully brought legal action to block a gas pipeline for the project.
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