Sharp falls in Europe and the US on Friday, had little effect on the ASX today, which saw little change.
Trading volume was light ahead of the Christmas holiday, a trend expected to continue until the last bell on Friday.
The S&P/ASX200 dropped 14.80 points or 0.21% to 7,133.90 and setting a new 20-day low, setting a new 20-day low. Over the last five days, the index has lost 0.65% and 2.33% over the last 52 weeks.
The bottom performing stocks in this index are The Star Entertainment Group Ltd and Imugene Ltd (ASX:IMU, OTC:IUGNF) down 16.67% and 9.09% respectively.
Looking at the sectors, only Energy and Materials were in the green, up 0.52% and 0.45% respectively. The biggest loser was Real Estate, down 1.08%, followed by Industrials -0.88% and Health Care down 0.84%.
The local market continues to hold up better than its peers but there isn’t much to cheer about coming into the festival of cheer.
“With no shortage of economic headwinds, investors struggle to find something cheerful about this holiday week after the two most dominant central banks cast a pall over the proceedings,” SPI Asset Management managing partner Stephen Innes said.
“Despite nascent progress on inflation, Central Bank’s hawkish beat down, motivated by the fight against financial conditions that have refused to tighten sufficiently and a still highly tight labour market with substantial momentum, is leaving the market to pick up the pieces of its own volition.”
What’s making news
Three things to watch
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. Keep an eye on Japan, Australia’s second-largest export market
Aussies should keep one eye on their third-largest trading partner and second-largest export market, Japan, with an update on inflation (December 22) and Bank of Japan (BOJ) rate decision (December 20) scheduled.
Currently, Japan’s economic situation is drastically different to the rest of the world, with low inflation and negative interest rates. However, that trend is starting to change. Last month, Japan’s core inflation was 3.6%, the highest reading in 40 years and well above the BOJ’s 2% target inflation rate.
Expectations are for another modest increase this month but this is unlikely to sway the BOJ’s ultra-easy stance for the time being, with rates expected to stay at -0.1% for the decision next week.
The big issue in Japan is the sliding Yen (the worst-performing major market currency in 2022), which has seen the cost of imports rise, and consumers are starting to feel inflation for the first time in years.
However, a dovish Fed could help support the Yen in 2023 and Japan will likely be one of the only countries that sees economic growth in 2023, supporting demand for Australian products as the world worries about a global recession.
2. Aussies’ financial confidence heading into 2023
It was a challenging year for investors in 2022 but the ASX has shone as one of the bright lights on the global scale, closing in on a break-even finish at year-end.
Has this stronger performance locally given Aussies more financial confidence heading into the new year?
More than half (51%) of those making 2023 New Year’s resolutions will focus on their finances, according to a survey by eToro.
Aussies have a better track record of keeping money-related resolutions than any other type. For those who did not manage to sustain their financial resolutions in 2022, the most common reasons for stopping were struggling to keep pace with the rising cost of bills (58%), too many expenses (53%) and inflation (44%).
This suggests that in 2023, there will be a delicate balance between navigating the rising cost of living pressures and ensuring consumers can still save and invest for their future.
However, we believe that a strong-performing local market in 2022 is giving Aussies more optimism in setting their investment goals and navigating cost of living challenges, given that their investment portfolios will likely look more attractive heading into 2023.
3. AU discounted tech stocks: Will full prices come back next year?
Some of the worst-performing names, such as Megaport, Xero, Block and Novonix (ASX:NVX), could see better fortunes next year as investors slowly nibble away at discounted tech, as investors look at slowly re-risking.
It was a torrid 2022 for tech stocks, locally and across the pond, but a mix of lower inflation and a pause from central banks tightening cycle might create a better environment as we head into 2023.
Forward-looking investors will see this mix as the groundwork for the next bull market and might be considering a slow addition of quality risk back into their portfolio.
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