The ASX 200 is trading lower for a second straight day, down 0.5% this afternoon. The Financials and Consumer Staples sectors are each down more than 1%, while the Materials sector is up.
The major banks are each trading lower. Westpac is the worst of the lot, down 1.9% after it was downgraded by Morgan Stanley (NYSE:NYSE:MS) to underweight. The broker lifted its rating for ANZ to equal-weight but it is also down 0.4% today, while Australia’s largest bank CBA is down 1.6%.
February rate cut tipped
ANZ now predicts the RBA will cut the cash rate by 25 basis points at its February meeting — earlier than its previous May prediction.
This shift in expectations follows weaker-than-expected consumer price growth data, which suggests the RBA’s preferred trimmed mean inflation measure will drop to 3.2%, below its 3.4% forecast.
Consumption data released Thursday also supports this case, with the ABS reporting a 0.4% rise in household spending — short of the anticipated 0.6%. Retail spending similarly underwhelmed, despite pre-Christmas sales promotions.
Comprehensive December quarter inflation data, due January 29, remains pivotal to the RBA’s decision. ANZ joins CBA in forecasting a February rate cut, while NAB and Westpac maintain a May prediction.
Bond markets now reflect a 78% probability of a February cut, up from 66% before the inflation data release.
Treasurer Jim Chalmers noted the shift in market sentiment but reiterated the RBA’s independence. Labor, ahead of the federal election, hopes for rate relief for borrowers impacted by 13 hikes since May 2022, which have lifted the cash rate to 4.35%.
ETFs achieve record inflows
VanEck’s December ETF Industry Pulse revealed that Australia’s exchange-traded funds (ETFs) industry achieved record-breaking growth in 2024.
Net flows for the month surged to nearly $4 billion, with Vanguard, BetaShares, iShares and VanEck capturing 96.4% of these flows.
For the year, total net flows reached $35 billion, surpassing the previous record of $23.2 billion set in 2021. The ETF market capitalisation also hit a historic high of $247 billion, for 38% year-on-year growth. The top four issuers accounted for 98.8% of net flows in 2024.
In response to the growing demand, fund managers launched 64 new ETFs across the ASX and CBOE, bringing the total number of exchange-traded products in Australia to over 400.
The surge was driven by international equities ETFs, which attracted over $15 billion in net flows, more than double that of Australian equities and far exceeding 2023’s trends.
VanEck anticipates continued robust growth ahead, projecting the ETF market cap to exceed $250 billion in early 2025 and reach $300 billion by year-end. This trajectory underscores the increasing popularity of ETFs among Australian investors.
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