Recession fears have hit the ASX today, with the ASX 200 hitting a three-month low.
The S&P/ASX200 is lower today, dropping 93.90 points or 1.43% to 6,480.80 and setting a new 50-day low. Over the last five days, the index has lost 3.56% and 11.74% over the last 52 weeks.
Bottom-performing stocks in this index are Costa Group Holdings Limited and New Hope Corporation Ltd, down 14.37% and 14.06% respectively.
Costa lost CEO Sean Hallahan, who had only been in the position since March 2021.
"It has been an intense couple of years in agriculture made even more challenging with the overlay of the COVID-19 pandemic," Hallahan said.
The departing chief was with Costa for five years and played a pivotal role as COO in the company’s growth.
There will now be a short handover period with interim CEO Harry Debney.
Costa chairman Neil Chatfield said, "We understand that the last two years, particularly in Victoria, have taken a large toll on the business and personal lives of individuals."
Travel stocks were the big losers, hitting 52-week lows despite the sector bouncing back to pre-COVID levels.
Flight Centre (ASX:FLT) Travel Group Ltd was down 1.1% in morning trading to $14.90 – its lowest share price since August 2021 when most of the Australian population was in lockdown and borders internally and externally were mostly shut.
Corporate Travel Management Ltd (ASX:CTD) was 2.4% lower to its own 52-week low of $17.20, however it reversed its downturn to be 0.51% higher just before market close and Webjet Limited was down 1.96% to $4.99.
Qantas Airways (ASX:ASX:QAN) Limited lost 1.17% just before market close having earlier hit a one-month low of $5.01, despite more passengers and lower fuel costs. It finished at 5.08.
Coal has taken a beating, but this was slightly offset by the health sector, Consumer Staples, Information Technology and Discretionary, the only sectors in the green.
What’s making news
Is travel still a bright spot?
Despite, its performance today, there are some who believe travel has a blue sky outlook.
HSBC chief economist Paul Bloxham delivered key insights from his upcoming keynote talk at Flight Centre Corporate’s #Illuminate2022 conference
Bloxham said increased travel would be a silver lining for both the Australian and New Zealand economies, all while high inflation, supply chain disruptions and the conflict in Ukraine continued to have an effect.
He said that travel would be a key factor shielding Australia from a hard landing amid the slowdown of the global economy.
“Travel is going to be a bright spot in the current challenged world. Households spent less during the pandemic and the country’s unemployment rate has been at its lowest since the mid-1970s. As such, Australians have saved over $250 billion and are ready to deploy those funds.
“Now that the world is reopening, there is a strong appetite for travel among the population and we expect to see a continued increase in travel activity, particularly domestically. Australians are also starting to travel abroad again in large numbers. Corporate travel is reviving faster than leisure, with businesses returning to face-to-face contact, particularly at conferences and other events.”
Bloxham will also share his global outlook at the conference.
“Globally, inflation rates are well above those we’ve seen in decades. While inflation is running at around eight per cent in US and nine per cent in Europe, its growth in Australia has fortunately been slower. We forecast Australia will avoid a recession, unlike some other countries,” he said.
“Supply constraints are also a deep global issue, because of the impact of the pandemic, the Ukraine war, labour shortages and a shortage of shipping containers. Policymakers – central banks and treasurers – will need to tighten up policy settings to try and slow demand down.”
Inflation in Australia will be managed by declining house prices and increasing interest rates.
“I anticipate consumer spending in Australia will slow from six per cent to close to two per cent next year. Consumers will also redirect more of their spending to services, including travel and hospitality,” he said.
“While this will be a challenge for Asian economies because they are big producers of manufactured goods, Australia – which has a strong service-based economy – will be in better shape. Bringing international tourists back also ought to be a key focus for policymakers and will benefit the economy.
“Closing our borders was a successful strategy in managing the pandemic. However, it did do damage and it will take some time for international travellers to return. I expect a travel bounceback between New Zealand and Australia first – something we’re already seeing.”
Bloxham also believes the Australian dollar will weaken further - predicting a fall to US$0.63 by mid-2023 - which will encourage travellers to our shores.
“This will be attractive to international travellers, who may see us as a cheaper option for them, which will be helpful to the economy. While it will be slower bringing international leisure travellers back over corporates, their return presents a great opportunity for local businesses,” he said.
“Ultimately, Australia’s economy is doing well. Spending is strong, the unemployment rate remains low and the labour market is strong. While we are operating beyond our capacity, and it is crucial we slow things down – travel is one thing we expect that people will choose to spend on.”
What's next for Australian stock market?
Wealth Within analyst Dale Gillham looks ahead to what we might expect from the ASX.
“The All Ordinaries Index ended last week down 2.79% as it fell to 6,756 points, which is just below the target level I had for the fall at 6,800 points. The events of the past couple of weeks are a reminder that no matter how much analysis we do, the market is always in control and will do what it wants rather than what we might think. This is also a stark reminder for investors not to get hung up on expert opinions, as no one is 100% correct.
“While I previously indicated that the market may rise, I also urged investors to be careful, as it was still possible it had not stopped falling, which we now know is the case. This is also why I have continued to recommend investors wait for confirmation before buying.
“So, where to from here?
“If the market is going to rise until the end of the year, it needs to turn soon. There is strong support around the low of 6,581 points from June and if the market turns up without breaking this level, then the next few months will be very bullish. If price falls through that level this week or into next there is even stronger support at 6,192.
Either way, I believe the All Ordinaries Index will bottom soon and start to move up over the following month or two. Once again, it is wise to sit tight until we can confirm the direction of the market.”
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