The ASX has had a rough start to October, and that trend looks set to continue with the exchange falling 0.84% or 58.10 points to 6,885.30 and setting a new 100-day low.
Only the Utilities sector made any kind of progress today, gaining 0.44% amid a wash of red. The worst hit were Financials, down 1.52%, Communication Services down 1.14% and Energy which shed 1.10%.
Unfortunately for the Australian economy, commodities didn’t make much of an impact either. Tin managed a 2.57% gain and West Texas crude 0.94%, but all others fell, none more so than zinc with a 4.43% loss.
Core Lithium Ltd (ASX:CXO) and Coronado Global Resources Inc were the stocks with the biggest dips today, falling 5.36% and 4.93% respectively.
“Wall of worry” grows
"The wall of worry seems to keep growing for investors in recent weeks, with hotter-than-expected jobs data overnight sending US stocks lower,” eToro market analyst Josh Gilbert reports.
“The data bolsters the case for the Fed keeping rates higher for longer and raising the expectation they may hike again before year-end.
“That slump from US stocks overnight will put the local market on the back foot today, especially tech, with the Nasdaq-100 falling by more than 1.8%.
“On the ASX 200 yesterday, 180 stocks finished in the red, a sign that there is nowhere for investors to hide in markets right now. Not even traditional defensive names are offering a haven from the cold.
“Instead, investors turn to yields over defensive names as dividends fall from their peak on the local market.
“The next catalyst for US stocks – which may help provide a tailwind to the local market and divert the recent rut, comes from US earnings season.
“Earnings estimates are recovering, with tech set to lead the way. Third-quarter earnings estimates for S&P 500 companies have been revised higher by 6.5% during the three months through to September.
“This could come at the perfect time for stocks, and if companies can match the growing expectations, it may offer markets a much-needed boost.
“Despite tech stocks enjoying a strong 2023, Afterpay’s parent company, Block, hasn’t followed suit.
“The stock has been in free fall since reporting earnings in early August, with shares down 26% this year, falling to $67 yesterday, a record low since listing on the ASX200 in 2021.
“The sell-off follows what looks to be a difficult period ahead for the company with the expectation of a weaker consumer – notable given Block’s exposure to small businesses."
Experts point to 32% chance of recession next year
Following the Australin economy’s dip into a per capita recession in June (per ABS data), an expert panel interviewed by Finder.com has pointed to a 32% or 1-in-3 chance of Australia falling into a full recession next year.
“The best way to safeguard your finances ahead of a potential recession is to pay down urgent debts and look out for more ways to save,” Finder head of consumer research Graham Cooke cautioned.
“A solid budget is also your ticket to financial freedom. Budgeting will show you where your money is going, what your essential expenses are, and where you have capacity to save.”
The risk of a recession may loom, but it’s in no way certain.
"The probability of a recession in the next year is definitely less than 50%," University of Sydney Professor of Macroeconomics James Morley said in the survey.
"However, there are risks from weak growth in China. If the US economy deteriorates, then a recession in mid-2024 is possible (although not the most likely scenario).
"Inflation will likely have dropped further by then, so the RBA would cut if there were enough indicators of recession."
The RBA held the cash rate at 4.10% yesterday, and there is little indication it intends to cut rates anytime soon with the spectre of sticky inflation hanging over the economy.
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