The ASX was slammed this morning falling by as much as 1% to 7,071.9 before making a big recovery.
That said, the S&P/ASX200 was still lower today, dropping 33.50 points or 0.47% to 7,111.20 and setting a new 20-day low. The index has lost 2.97% for the last five days, but has gained 1.03% over the last year to date.
The bottom-performing stocks in this index are Brainchip Holdings Ltd and Perpetual Limited, down 4.76% and 4.71% respectively.
The market recovered from a near nine-week low, buoyed by Goldman Sachs (NYSE:GS)' move to withdraw its March Fed rate hike call in response to the collapse of Silicon Valley Bank.
"In light of recent stress in the banking system we no longer expect the FOMC to deliver a rate hike at its March 22 meeting, with considerable uncertainty about the path beyond March," Goldman Sachs (NYSE:GS) chief economist Jan Hatzius said.
Looking at the sectors, Materials managed to buck the downward trend, gaining 0.95%. However, all bar energy (+0.43%) were in the red with Infromation Technology the worst performing sector losing 1.32%. Financials was the next biggest loser, dipping 1.22%.
Two 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. Consumer Confidence - Could a record low be on the cards?
After last week’s 25bps hike from Australia’s Central Bank handed more pain to Aussie households, next week’s consumer confidence may not be pretty.
Confidence has rebounded slightly since the record low in November but since then inflation and interest rates have continued to move higher, meaning living costs have soared whilst savings dwindle.
Although the RBA’s tone was dovish in its recent statement, it still foresees further rate rises will be needed to bring inflation to target, which will only dampen consumer sentiment further.
So while spending held up relatively well in 2022, there looks set to be a sharp slowdown in the months ahead. The saving grace may be the weaker-than-expected CPI data at the start of March which saw inflation decline from 8.4% to 7.4%, meaning that December’s reading was likely the peak, but that may not be enough to improve consumers' pessimism.
2. AU Unemployment - Peak employment is behind us
January’s weaker-than-expected employment number may just be the start of a weakening jobs market in Australia as the economy slows down. The RBA has suggested further rate hikes are ahead, but the language from its statement could indicate a pause is near, especially if next week’s unemployment number shows a slumping labour market.
Australia’s population growth has continued to rise since the pandemic as migration increases, meaning supply is surging, but demand for workers is cooling. This looks set to intensify as the year goes on, causing the unemployment rate to climb, which could force the RBA’s arm to stop hiking and cut rates later in the year. However, the good news for consumers is that unemployment is still near historic lows, and the threat of an unemployment crisis is highly unlikely.