The ASX fell 1.27% or 92.10 points to 7,161.10 today, reversing the progress it has made over the last five days and slipping an extra 0.48% to boot.
Almost every sector was down during today’s trading, none more than Materials with a solid -1.97% drop and Consumer Discretionary (-1.76%). Only Info Tech escaped with a marginal 0.08% uptick.
Base metals were also down across the board alongside gold, although silver (+0.96%), palladium (+0.76%) and platinum (+0.57%) resisted the metals bust, and West Texas crude gained 2.44%.
As predicted this morning, the heavyweight iron ore miners dragged the rest of the market down with them; BHP (ASX:BHP) fell 2.42%, Fortescue (ASX:FMG) 1.58% and Rio Tinto (ASX:RIO) 1.85%.
Iron ore is down 1.57% for the last five days and as the global economy stands it’s looking like it might fall further.
Many analysts were banking on China’s grand re-opening post-COVID-19 to liven up the iron ore and steel markets, but as Stock Doctor's Daniel Ortisi wrote in the feature 'Why lithium fundamentals are outpacing iron ore', property developers’ sales in China saw a 28% year-on-year decline for the month of June, pointing to a weakening in the market for iron ore.
Cardano chief economist Shweta Singh explained why China’s slow recovery may strand the rest of us in interest rate limbo for a while longer.
“In revising lower our expectations for post-COVID reopening growth in China, we are giving less credence to one of the few supportive factors for global economic conditions in the near term,” she said.
“Growth is set to slow. The persistence of elevated inflation, particularly with respect to core measures, confirms our long-standing view that central bank policies around the world are going to have to stay in restrictive territory for longer than the markets presently expect.”
Cardano’s assessment points to global growth numbers well below expected consensus, tight labour markets and continued wage pressure for its dour assessment, among multiple fiscal policy and political risks – the uncertain direction of monetary policy in Japan and falling credit growth in the US chief among them.
“Deterioration in credit conditions will provide an additional headwind for US corporate earnings and equity market earnings multiples - a further threat to the US equity market,” the investment view report read.
The investment management and advisory business believes that outlook could worsen if further stress is placed on the banking sector, or if the current energy trends – which are positively boosting economic growth – reverse.
On the other hand, Cardano says the market could recover much faster than expected should there be a swift resolution to the war in Ukraine (currently, extremely unlikely), or if global supply-side constrains ease.
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