The ASX is down today on the back of weak retail data. The S&P/ASX200 dropped 70.90 points or 0.95% to 7,385.00 after setting a new 100-day high. Over the last five days, the index has gained 0.97% and is currently 2.41% off of its 52-week high.
The bottom performing stocks in this index are Capricorn Metals Ltd (ASX:CMM) Regis Resources Ltd (ASX:RRL) down 9.13% and 8.04% respectively.
All sectors were down in mid-afternoon trade, with Real Estate the main drag, down 3.00%.
Energy was down 0.24% at time of writing after Victorian Premier Dan Andrews banned gas for all new homes from 2024.
Victoria bans gas in new home builds
With the ban of gas, new homes will be powered entirely by electricity. The government estimates that will save households $1,000 per year.
Energy Minister Lily D’Ambrosio said “We know that with every bill that arrives, gas is only going to get more expensive.
“That’s why we’re stepping in to help even more Victorians get the best deal on their energy bills.”
The Australian Industry Group, which represents appliance manufacturers, warns Victoria’s ban will start a trend in other states.
“The government has now made the call that electrification is the path ahead for households, at least.
“Victoria is the largest residential gas market and where it goes, the nation is likely to follow,” AI Group chief executive Innes Willox said.
Retail data shows rate impact
The Reserve Bak of Australia is likely to keep rates on hold following this week’s inflation figures and retail data.
The RBA meeting minutes for the July board meeting shone a light on incoming data ahead of the RBA's August board meeting.
"At the August meeting, the board would have the benefit of additional data on inflation, the global economy, the labour market and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks," the RBA stated.
IG Markets analyst Tony Sycamore said, “Following a downside surprise in inflation on Wednesday, the market was eagerly awaiting the release of Retail Sales data this morning, the final piece of the RBA jigsaw puzzle before Tuesday’s board meeting. The data showed Australian retail turnover fell 0.8% in June 2023, well below consensus expectations for a flat reading (0.0%).
“Today’s numbers provide a sure sign that higher interest rates are impacting household spending patterns and will likely ensure the RBA keeps its cash rate on hold at 4.1% at next week’s board meeting.”
NRA chief executive officer Greg Griffith noted how far consumer confidence had fallen.
“Department stores were hit hardest, experiencing a 0.5% decline in sales, followed by clothing, footwear and personal accessory retailing which fell 2.2%,” he said.
“Food retailing was the only industry to experience an increase in sales, by 0.1%, but this can be attributed to rising food prices.
“Consumers are only opening their wallets for non-discretionary spending, if not for special occasions.
“Big retailers have found consumer loyalty with their own branded products because of how cheap and familiar they are. We encourage other retailers to adopt similar sales tactics to ride out the economic storm."
Ben Dorber, ABS head of retail statistics, said: "Retail turnover fell sharply in June due to weaker-than-usual spending on end of financial year sales. This comes as cost-of-living pressures continued to weigh on consumer spending.”
On the flipside, UBS economist George Tharenou expects the RBA will hike rates by 25 basis points to 4.35%.
"The most likely timing remains in August; albeit the Q2 CPI, and now the June retail data, make it a closer call," Tharenou said.
"More broadly, if the RBA don't hike in August, it would seem quite likely there has been a material dovish shift in their 'reaction function', and hence it would argue that the peak in the cash rate has been reached.
"This is because we expect the lagged impact of prior rate rises is likely to continue to weigh on the economy ahead, which will result in higher unemployment and hence a further easing of inflation pressure."
Tuesday awaits.
What are the best and worst performing sectors this week?
The best performing sectors include Communication Services, Energy and Real Estate, which are all up over 3%. The worst performing sectors include Utilities and Consumer Staples, as they are both just in the green followed by Healthcare up over 1%
The best performing stocks in the ASX top 100 include REA Group Ltd up over 8% followed by Wisetech Global Ltd up over 7% and SEEK Ltd up over 6%. The worst performing stocks include Macquarie Group Ltd down over 4% followed by Allkem down over 3% and Origin Energy Ltd (ASX:ORG) down over 1%.
What's next for the Australian stock market?
Wealth Within co-founder and chief analyst Dale Gillham looks at what’s ahead.
“The Australian stock market never ceases to amaze me given that last week it looked as if it might resume its fall down to around 7,000 points, but this week the story is vastly different. In three of the four days so far this week, the market has been quite bullish trending up around 2%.
“More importantly, it is trading up around highs not seen since mid-February of this year and is above the resistance level at 7,600 points. So, where will the market head from here?
“If we are to rely on what has unfolded in recent times where anything can happen, it is possible that the market could move in either direction, particularly with reporting season just around the corner. As such, I will continue to caution investors to manage their risk. This means being selective with your stocks, buy quality over penny dreadfuls and always have an exit strategy.
“Over the next two to four weeks, the market is likely to be bullish and may even challenge the all-time high of 7,956.30 points. In mid to late August, we may see some increased volatility and possibly one or two down weeks although I don’t believe this will slow the market too much, as it rises through to the end of this year.
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