The S&P/ASX200 dropped 25.30 points or 0.35% to 7,126.00, despite crossing above its 20-day moving average. Over the last five days, the index has gained 2.59% but is down 4.31%for the last 52 weeks.
Bottom-performing stocks were BrainChip Holdings Ltd (ASX:BRN) and De Grey Mining Ltd, down 8.84% and 8.25% respectively.
BRN announced a capital call notice to sell 30 million shares to LDA Capital Limited (LSE:CAPD) and LDA Capital LLC. The company is obligated to raise a minimum of $15 million during 2023.
“The proceeds raised from the capital call will be used to accelerate our innovation of the groundbreaking Akida technology as we extend our industry leadership in Edge AI. In 2023 the company will tape out another chip and release significant enhancements to our IP offering,” BrainChip CEO Sean Hehir said.
“Additionally, we will further expand our go-to-market capabilities by hiring sales personnel in key international markets, as well as increase our domestic sales and marketing headcount.”
Making news
3 things to watch for the week ahead
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. Australian monthly inflation: reaching peak
This week, Australia hands down another monthly update on inflation. The consensus is for inflation to rise in the month of November to 7.4%. We are moving closer to peak inflation, which will likely be seen in the Q4 figure released at the end of the month, where expectations are for 8% inflation.
However, investors should take comfort in the thought that lower inflation is around the corner. Commodity prices have continued to fall in the last few months, with crude oil 11% in the last three months and supply chain issues look to be normalising once again, with freight costs falling and global shortages easing.
The million-dollar question, though, is how quickly inflation will fall. Inflation will be the fundamental key to market moves this year and will ultimately dictate when investors begin to take on more risk in markets.
2. Australian retail sales: striking a balance
After a drop of 0.2% in October, data for November is likely to show a turnaround (expected January 11). Black Friday, Cyber Monday and the lead-up to Christmas are likely to have seen shoppers disregard rising living costs with a huge bout of spending.
Savvy shoppers may have brought forward their Christmas spending for Black Friday to try and find deals, downtrading to less expensive retailers, with a spending spree before tightening their belts in 2023.
However, although we know retail spending is slowing down, the RBA is uncertain of the timing and extent of this slowdown, which could cause some headaches for the board in early 2023.
The RBA noted in their December minutes that they wouldn’t rule out returning to more significant rate increases if required, pointing towards the difficulties of lowering consumption without tipping the Australian economy into a recession.
3. US Inflation: The most important number in markets
Another decline in US inflation to start the year could set the market tone for markets in 2023. Inflation is the most important number in markets and Australian investors will be looking across the pond on January 12 to see if inflation is continuing to drop.
Broad falls in US inflation pressures, from goods to services and the labour market, are all key to the Fed further slowing down its rate hike cycle to 25bps in February and setting the scene to pause in March.
But last week’s Fed’s minutes did show that it would take substantially more evidence for them to be confident inflation is on the sustained path down.
So, taking the view that inflation doesn’t come down at the pace that the Federal Reserve likes means the odds of a recession will rise. This may see investors look at the best-performing theme of 2022, dividends.
A recession could see earnings fall, which may see investors take haven in income stocks which are likely to show resilience whilst also providing the potential for outperformance.
What’s happening in oil markets
Wael Makarem, senior market strategist – MENA at Exness, gives his energy market analysis.
Oil markets are heading higher thanks to hopes of greater demand from China as the country continues to reopen. Demand has previously been strongly impacted by the strict sanitary restrictions imposed due to the zero-COVID policy.
At the same time, some doubts remain as the global economy could still be exposed to decelerating growth. Recession fears could limit upside potential in energy markets in general.
It remains to be seen how the Chinese economy would rebound and to which extent the reopening would reinvigorate industrial activity. In this regard, the government has issued higher oil import quotas earlier than usual this year in a bid to boost economic activity.
Stronger demand from China could balance out the decreases seen elsewhere, helping the oil market maintain a stable if not more positive outlook.
Natural gas on the other hand could continue to see downward pressures as warmer winter temperatures in Europe have limited demand. Europe has been the source of strong demand in 2022 as the conflict in Ukraine and sanctions on Russia have disrupted supplies.
As a result, natural gas markets could remain exposed to unexpected changes in temperatures during the remaining period of cold months in Europe. Additionally, prices could be affected momentarily in case of transport and supply issues as was the case multiple times in 2022 in Eastern Europe and Turkey.
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