The ASX200 finished 122 points (+1.71%) higher last week at 7,279. The uplift came close to reversing the prior week’s 121-point fall.
Today, however, the market is likely to start the week in the red.
All 11 sectors gained last week, led by Materials (+0.96%), IT (1.93%) and Energy (+1.68%). The defensive Utilities (0.28%) and Health Care (+0.29%) sectors were the main drags.
“The gains followed a positive lead from Wall Street, higher commodity prices and a jobs report showing the Australian labour market remains in good shape despite the RBA’s 400bp of rate hikes,” IG Markets analyst Tony Sycamore said.
Over on Wall St on Friday, the S&P 500 marked its worst session since August 24 as tech stocks staggered.
News in brief showed the world's largest chipmaker asking suppliers to delay shipments due to slowing demand, gold stocks making a comeback and markets bracing brace for a big week for central banks and macro data.
Sycamore writes, “This week is a huge one for markets, with central bank meetings for the Fed, the BoE, the BoJ, the Norge’s Bank, the Riksbank and the SNB. On top of that, there is CPI inflation data in the UK and Japan, as well as global flash PMIs later in the week.”
What happened last week?
Here’s what we saw (source Commsec):
US markets
Fell on Friday, with a US$4 trillion options event amplifying volatility and traders weighing the impacts of a strike that hit Detroit automakers, while sifting through US economic data before the US Federal Reserve decision this week. Ford Motor (NYSE:F) (-0.1%), General Motors (NYSE:GM) (+0.9%) and Chrysler parent Stellantis (+2.2%) whipsawed.
The Philadelphia SE Semiconductor index slid 3% on reports that Taiwan's TSMC asked major suppliers to delay delivery of high-end chipmaking equipment. Nvidia dropped 3.7% and Advanced Micro Devices (NASDAQ:AMD) lost 4.8%. Adobe (NASDAQ:ADBE) fell 4.2% on a notes offering after its third quarter results. Rising bond yields pressured Meta Platform shares, which slid 3.7%.
- The Dow Jones index fell by 289 points or 0.8%.
- The S&P 500 index lost 1.2%.
- The Nasdaq index shed 218 points or 1.6%.
- For the week, the S&P 500 fell 0.2% and the Nasdaq lost 0.4%. But the Dow added 0.1%.
Closed at five-week highs on Friday, adding to their post-European Central Bank meeting gains. Consumer products, mining and autos led sectoral gains, up between 1.3% and 1.8%. French luxury names Kering (EPA:PRTP) and LVMH climbed 1.8% and 2.5%, respectively, after data showed China's factory output and retail sales grew at a faster pace in August.
The continent-wide FTSEurofirst 300 index rose by 0.3% and was up 1.6% for the week, the most in two months.
The UK FTSE 100 index gained 0.5%, jumping 3.1% for the week, the strongest weekly gain since early January.
Currencies
Were mixed against the US dollar in European and US trade. The Euro rose from US$1.0644 to US$1.0686 and was near US$1.0655 at the US close. The Aussie dollar fell from US64.71 cents to US64.24 cents and was near US64.30 cents at the US close. The Japanese yen dipped from 147.38 yen per US dollar to JPY147.94 and was near JPY147.80 at the US close.
Commodities
Global oil prices rose on Friday, lifting for a third straight week, as the market continued to tighten on the back of production cuts from Saudi Arabia and Russia.
- The Brent crude price rose by US23 cents or 0.2% to US$93.93 a barrel.
- The US Nymex crude price gained US61 cents or 0.7% to US$90.77 a barrel.
- Oil contracts rose about 3.7% for the week.
- The copper futures price slid 0.5% and the aluminium futures price shed 1.6%.
- Copper rose 2.3% and aluminium was up 0.6% for the week after data from China showed signs that its economy was stabilising.
- The gold futures price rose by US$13.40 or 0.7% to US$1,946.20 an ounce on Friday, helped by safe-haven buying after United Auto Workers union kicked off strikes at three automakers in Detroit, US.
- Spot gold was trading near US$1,923 an ounce at the US close.
- Bullion rose 0.2% for the week on hopes around a likely pause in US interest rate hikes.
- On Friday, iron ore futures gained US73 cents or 0.6% to US$121.29 a tonne, the highest since April, as Chinese authorities boosted economic support aimed at stimulating the construction and property industries.
- Prices of the steel-making ingredient rallied 3.8% over the week.
Wealth Within founder and analyst Dale Gillham gives his take on what to expect from the ASX.
“It is possible that we may continue to see volatility in the market into at least early this week if the All Ordinaries can hold above its current levels. If it rises into the week, we may see a sustained move up over the coming month.
"That said, I am not confident this will occur and without wanting to sound pessimistic, we need to be prepared for a fall in October down to around the 7,000-point support level I have mentioned several times in the past.
“Looking at the top 20 stocks, which will lead any charge up out of this current volatility, things are looking good, so we might need to be patient just a little longer. So far, this week both the Materials and Financial sectors are moving up together, which is also a great sign. If these sectors continue to move up together, then the market as a whole will also rise.”
Three 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. All eyes on China loan rates
On Friday, China’s one and five-year term loan rates are up for review. With regulators increasingly concerned by the nation’s fledgling post-COVID recovery, a cut to both rates is possible. Even so, a cut of anything less than 0.10 percentage points will almost certainly not be enough to keep up with the financial turmoil.
Last month, the People’s Bank of China on Monday cut the one-year loan prime rate from 3.55% to 3.45% but left the five-year loan prime rate unchanged, stoking disappointment as the call for more decisive measures from the central bank and government grows louder.
The triple threat of dwindling demand for Chinese goods, a narcoleptic property market and record low birth rates telegraphs a clear need for heavy policy intervention, and while there has been some stabilisation compared to earlier this year, markets seem to be growing sick of a lack of firm rehabilitative action in the Chinese economy.
2. RBA minutes
The release of the RBA’s quarterly bulletin on Thursday will be significant as Michelle Bullock officially steps into the role of Reserve Bank governor. Markets will be watching closely to get a better picture of just how hawkish Bullock intends to be, with many analysts expecting at least one more hike in this cycle before the RBA calls time on its mission to facilitate a soft landing.
Following a middling earnings season across discretionary goods categories, it’s anticipated that the impact of this year’s rapid hiking cycle may be acknowledged by the Governor – but stubborn Australian unemployment figures and a surprising uptick in US consumer price data this week may serve as a warning to not ease off just yet.
3. Fed Reserve to make a call on rates
In the US, the Federal Reserve is slated to make its monthly call on rates on Wednesday. The meet is the third remaining scheduled rate meeting on the 2023 calendar (currently, nothing is set for October), and while markets are anticipating a pause on rates, it’s unlikely the Fed is altogether done with its hiking cycle as inflation continues to prove difficult to tame and the central bank remains firm on its 2% inflation target.
As always, the call will come down to the data on hand, and the subsequent release of the Federal Open Market Committee (FOMC) Economic Projections should give markets a clearer picture on how close the Fed is to acknowledging the peak of this current cycle.
On the small cap front
The S&P/ASX Small Ordinaries finished 1.66% higher on Friday at 2,811,10.
Over the five trading days last week, it gained 1.10%.
On the news front today, you can read about the following and more throughout the day.