The ASX is expecting a slow start to the week with ASX 200 futures 0.5% lower at 8,267 points after Wall Street's weak close on Friday. School has finished, holidays are booked and there are certainly less cars on the road.
The ASX 200 dropped 124 points (-1.48%) last week, closing at 8,296, as a strong November Labour Force report tempered expectations of a Reserve Bank of Australia (RBA) rate cut in February. The decline extended the index’s retreat from its record high of 8,514.5.
Information Technology (-5.73%) led sector losses, followed by Real Estate (-2.03%), Financials (-2.03%) and Industrials (-1.98%). Conversely, Consumer Staples (+0.08%) and Materials (+0.01%) eked out marginal gains, while Energy (-0.35%) and Consumer Discretionary (-0.72%) outperformed the broader market.
On the stock level, Platinum Asset Management (-17.41%), Cettire (-14.18%), Bubs Australia (-12.50%) and Life360 (-10.84%) recorded significant losses. In contrast, Appen (+18.89%), Insignia Financial (+17.21%), Bannerman Energy (+11.07%) and CQG Partners (+9.13%) delivered robust weekly gains.
“This week, the highlight on the local data calendar is Wednesday’s Westpac Consumer Confidence survey, expected to rise for the fourth consecutive month, supported by last week's dovish shift by the Reserve Bank of Australia and robust labour force report," noted IG Markets analyst Tony Sycamore.
"The interest rate market is pricing in a 50% chance of a 25bp RBA rate cut in February, with a full 25bp rate cut not priced until May.”
Mixed results in US
“It was a mixed session for US stock markets on Friday. The Nasdaq hit a fresh record high, while the Dow Jones fell for a seventh straight session, weighed on by higher US 10-year yields ahead of this week's FOMC meeting,” Sycamore wrote.
The benchmark US 10-year Treasury yield climbed to a three-week high of 4.40% on Friday, marking its fifth consecutive session of gains. The upward movement followed stronger-than-expected Producer Price Index (PPI) and Consumer Price Index (CPI) data, raising concerns about the scale of potential Federal Reserve rate cuts in 2025 amid persistent inflation pressures.
In equities, tech stocks faced mixed fortunes. Nvidia (-2.25%), Meta (-1.66%) and Amazon (NASDAQ:AMZN) (-0.66%) recorded declines, while Tesla (NASDAQ:TSLA) gained 4.34% to close at a record high of $436.23.
Broadcom (NASDAQ:AVGO) surged 24.4% to $224.80, reaching a $1 trillion market capitalisation after reporting a 220% spike in AI-related revenue. The strong results lifted sentiment across the semiconductor sector, with Marvell (+10.8%) and Taiwan Semiconductor (+5%) also posting significant gains.
“Looking ahead, the Federal Reserve's interest rate decision is in focus, along with key reports on retail sales, PCE prices, personal income and spending. The rates market starts the week pricing in a 95% chance of a 25bp rate cut at Thursday morning's FOMC meeting. Two more 25bp Fed rate cuts are expected to follow in 2025,” Sycamore said.
“A reminder that we are now entering the “sweet spot” for US equities. The last two weeks of December and the first two weeks of January are historically the strongest four-week stretch for the S&P500, with an average return of 2.6%.”
Euro markets decline
European sharemarkets declined on Friday, marking the first weekly loss in three weeks, as investors weighed uncertainties around the pace of monetary easing in the eurozone next year. Concerns over slowing economic growth and the possibility of a trade war further dampened sentiment.
Basic resources stocks led the losses, dropping 2.3% as industrial metal prices weakened.
- The continent-wide FTSEurofirst 300 index fell 0.5% on the day, ending the week 0.8% lower.
- In London, the UK FTSE 100 index edged down 0.1% on Friday and posted the same 0.1% decline for the week.
Sentiment was impacted by data showing the UK economy, as measured by gross domestic product (GDP), contracted by 0.1% in October, falling short of expectations for a 0.1% increase.
Currencies and commodities mixed
Currencies
In European and US trade, currency movements against the US dollar were mixed. The Euro strengthened from US$1.0453 to US$1.0523, closing near US$1.0500.
The Australian dollar eased from US63.82 cents to US63.51 cents before settling around US63.60 cents at the close. Meanwhile, the Japanese yen weakened, moving from 152.69 yen to JPY153.79 per US dollar and finishing near JPY153.65.
Oil prices rally on supply concerns
Global oil prices climbed about 2% on Friday, reaching a three-week high amid expectations of tighter supplies from sanctions on Russia and Iran and potential demand boosts from lower interest rates.
Brent crude rose US$1.08 (1.5%) to US$74.49 a barrel, gaining 4.7% for the week. Similarly, US Nymex crude added US$1.27 (1.8%) to US$71.29 a barrel, posting a weekly rise of 6.1%.
Base metals retreat amid dollar strength
Base metal prices fell on Friday, with copper futures down 1.1% and aluminium futures sliding 0.6%, pressured by a stronger US dollar.
For the week, copper edged up 0.3%, while aluminium declined 1.1%.
Gold pulls back from multi-week highs
Gold futures dropped US$33.60 (1.2%) to US$2,675.80 an ounce, following a strong US dollar rebound.
Spot gold traded near US$2,648 an ounce at the US close but gained 0.6% over the week.
Iron ore dips but ends the week higher
Iron ore futures slipped US18 cents (0.2%) to US$105.31 a tonne on Friday.
However, the commodity advanced 1.2% for the week, supported by optimism surrounding China's latest stimulus measures to bolster its economy.
What about small caps?
The S&P/ASX Small Ordinaries dipped 0.12% on Friday to 3,133.90. The index took a 2.34% dive for the week.
It has been a steady start to the new week for newsflow and you can read about the following and more throughout the day.