The Monday Report – 15 January 2024

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This story features HUB24 LIMITED, and other companies.
For more info SHARE ANALYSIS: HUB
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck

Greg Peel will return later this month.

The local market starts without much inspiration from offshore this Monday morning.

US markets closed off on Friday without much movement either way, even though the PPI release kept the mantra alive that the Fed might soon start cutting the cash rate. CommBank for one thinks policy loosening will start in March. No action today as America commemorates MLK.

The headline December PPI fell -0.1% m/m. Energy prices were down -1.2% m/m, while the core PPI held steady for a third consecutive month. On an annual basis, the PPI rose 1% y/y, up from 0.8% y/y in November. Core PPI was up 1.8% y/y.

Over in China, economic data continue to point to weak momentum with December credit growth underwhelming expectations. National elections in Taiwan have kept the status quo in place.

Tonight does include the first Republican caucus in Iowa where local enthusiasts have to defy ultra-cold temperatures to have their say.

The US debt ceiling saga rolls on with Congress needing to pass a continuing resolution by Friday to avoid a partial government shutdown from Saturday.

Equally notable: the first batch of earnings reports from US banks failed to inspire share prices.

In Australia, the February reporting season locally is still weeks away but investors' focus will be drawn to quarterly market updates and production reports from the likes of Hub24 ((HUB)), Rio Tinto ((RIO)), BHP Group ((BHP)) and Whitehaven Coal ((WHC)).

The following week sees ResMed ((RMD)) unofficially opening the local corporate results season. The company is headquartered and listed in the USA.

The week ahead sees the release of more Chinese economic data, as well as more CPI and PPI releases in Europe, the UK, and Japan. Other points of focus are likely US retail sales, scheduled for Wednesday and the Australian labour market on Thursday.

Analysts at stockbrokers will be returning to their desk this week and next. FNArena's daily Australian Broker Call Report hasn't exactly been brimming with lots of updates and fresh insights thus far in January. That should start to change. FNArena too will direct focus to February, starting with our in-house calendar.

As per always, once the local reporting season gets underway, FNArena will keep a daily tab on analysts' assessments of fresh market updates. For those readers who'd like to take one final peak at the overview of local corporate results post August last year, we've kept that daily overview open for everyone to access (will change next week): FNArena's Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/)

Rania Gule Market Analyst at XS.com reports:

The price of gold (XAU/USD) rebounded from its weekly low of US $2013 to reach US$2038 during early Friday trading hours. However, I believe the upward trend in gold prices may be limited due to the possibility that the Federal Reserve may not start lowering interest rates early this year as expected. This could lead to some selling pressure on prices.

At the same time, the U.S. Dollar Index (DXY) rose to 102.31 points, and U.S. Treasury yields increased, with the 10-year yield reaching 3.97%. This added negative pressure on prices and slowed down the strength of the current upward trend.

Yesterday, the U.S. inflation report came in higher than expected. The U.S. Consumer Price Index for December rose to 3.4% every year, up from the previous reading of 3.1% and better than the expected 3.2%. Monthly, the core Consumer Price Index rose by 0.3% compared to the previous 0.1%, surpassing expectations at 0.2%. The core CPI, which excludes volatile food and energy prices, also rose by 3.9% yearly in December, compared to estimates of 3.8%.

On the geopolitical front, after weeks of attacks on ships in the Red Sea by Houthi rebels in Yemen, disrupting global shipping, the United States and the United Kingdom conducted airstrikes late yesterday on Houthi targets in Yemen, hitting radar installations, storage sites, and missile launch platforms. The Western retaliation occurred even after Houthi leader Abdul-Malik al-Houthi promised a "major" response if the U.S. and its allies took military action against his group.

From my perspective, the U.S. is likely to take further measures to protect its interests and ensure freedom of international trade. The increasing geopolitical tensions may lead investors towards the traditional haven, potentially raising the likelihood of a gold price increase in the short to medium term.

Especially as the U.S. dollar returned to the red zone after a short rise following higher-than-expected U.S. Consumer Price Index (CPI) data. However, the markets still anticipate a roughly 70% chance of a rate cut by the Federal Reserve in March.

Concerns are also growing about the slowing Chinese economic recovery and increasing geopolitical risks, which could increase the chances of a recession in the United States. This could prompt the Federal Reserve to maintain a cautious tone regarding its future monetary policy. This comes after the latest data from Chinese customs on Friday showed that China's exports declined last year for the first time since 2016, confirming the prevailing economic concerns in the markets.

In my view, the movement of the dollar index will also remain weak due to the absence of plans to prevent a government shutdown next week. A dispute over spending has emerged between the far-right Republicans in the House of Representatives, while Congress began leaving Washington on Thursday for a long weekend. This helps gold prices stay positive.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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