The ASX was lower today, falling 0.31% or 20.10 points to 7,422.60 after setting a new 50-day high.
Every sector but Health Care and Consumer Discretionary was trading in the red today but none more so than Real Estate, which fell a full 1.29%. Health Care's modest 0.35% upswing and Consumer Discretionary's smaller 0.23% contribution wasn’t enough to stem the bleeding.
US markets finished on a strong upswing last week but that progress is likely to slow after the US Fed clarified comments that led the market to price in multiple interest rate cuts for next year.
Commodities were mostly unchanged today, with only platinum and palladium standing out.
The platinum group elements were ironically on opposite sides of the balancing books today, with platinum losing 1.94% as palladium stacked on a whopping 5.99%.
NASDAQ hits record highs
Capital.com senior market analyst Kyle Rodda walks us through the US Fed’s rate cuts predicted for 2024 and record highs for the NASDAQ, which has been on a strong run as treasury bond yields continue to fall.
“The markets sobered up slightly at the end of the week as Fed speakers appeared to push back on the notion of rate cuts next year,” Rodda writes.
“The central bank wheeled out New York Fed head John Williams to clarify things, suggesting that the Fed “isn’t really talking about rate cuts” and tabling a March cut is premature.
“The Fed’s use of Williams is telling because his commentary a few weeks ago about the case for lowering rates as inflation falls to keep real rates steady fuelled the euphoria about cuts.
“The mixed messaging raises the question of whether the Fed has fumbled its communication and potentially scored an unfortunate own goal as financial conditions loosen as a result of the new forward guidance.
“The markets mostly shrugged off the pushback from the Fed, holding the line that somewhere around six rate cuts are coming in 2024.
“Long-term yields continued their short-term trend lower, with the US 10-year holding below 4% and the 30-year falling below that level. That dynamic underpinned another rise in the NASDAQ, which hit fresh record highs.
“Although there’s ample justification for scepticism about where equities in the US are currently and the downside risk to earnings that may come from an economic slowdown, from a technical standpoint, there’s nothing more bullish than fresh record highs.
“The S&P500, meanwhile, is only a few per cent away from the same milestone.
(US Tech100 index. Source:Capital.com)
“Pockets of weakness in the global economy were conveyed in Friday’s flash PMI surveys. The situation in Europe is particularly grim, with recession looking more likely across the region.
“Economic activity in the US is more mixed. Manufacturing is contracting at a faster pace than once thought; however, services activity is resilient and still expanding, perhaps adding weight to the so-called 'soft landing' thesis for the US economy.
“There is little on the docket today in Asia, with the next significant risk event for the region tomorrow’s BOJ meeting. Futures are signalling a soft start for equities, with nervousness about China’s ailing economy likely to remain front and centre.
“Energy prices may be in focus, too, as attacks on container ships in the Red Sea sustain an elevated risk of future supply shocks.”
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