Daily Market Reports | 9:18 AM
This story features ANZ GROUP HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: ANZ
One last -25bp rate cut from the Fed came with reduced dot plot “guidance” (if we can call it that) for the year ahead and US equities have sold off in response, with bond yields and USD on the rise.
The local bourse is expected to endure a good old fashioned Risk Off day today. The Australian dollar has fallen out of bed.
| World Overnight | |||
| SPI Overnight | 8182.00 | – 132.00 | – 1.59% |
| S&P ASX 200 | 8309.40 | – 4.60 | – 0.06% |
| S&P500 | 5872.16 | – 178.45 | – 2.95% |
| Nasdaq Comp | 19392.69 | – 716.37 | – 3.56% |
| DJIA | 42326.87 | – 1123.03 | – 2.58% |
| S&P500 VIX | 27.62 | + 11.75 | 74.04% |
| US 10-year yield | 4.49 | + 0.11 | 2.49% |
| USD Index | 107.80 | + 1.12 | 1.05% |
| FTSE100 | 8199.11 | + 3.91 | 0.05% |
| DAX30 | 20242.57 | – 3.80 | – 0.02% |
Good morning.
US price action overnight has been closely linked to FOMC members’ dot plots with the -25bp rate cut, as expected, labelled a hawkish cut.
The market did not like it, as evidenced by the heavy losses recorded for key equity indices.
As explained by National Australia Bank economists this morning, a hawkish -25bps cut by the US Fed saw yields and the US dollar rise, while equities fell.
What made it hawkish initially was there was one formal dissenter who wanted to hold (and four in total who had pencilled in a hold in the dot plot).
The dot plot also indicated just two cuts in 2025 (vs. four cuts in the prior dot plot; economists were generally tipping three cuts, and markets were broadly priced for 50bps).
The median dot now sits at 3.9% for 2025 (from 3.4% previously), 3.4% for 2026 (from 2.9% previously), 2027 3.1% (from 2.9% previously), and the longer run 3.0% (from 2.9% previously).
On the longer-run neutral, six members now see it at 3.5% or above, an increase from four members previously.
The range is now 2.4-3.9%, so a Fed funds at 4.25-4.50% is pretty much at neutral for one member on the FOMC.
Bizarre detail: the dot plots are not meant as “guidance” but in today’s world they are interpreted as such.
The historic track record of these dot plots is abysmal, if anyone’s looking for accuracy in predictions, but that doesn’t deter from responding in the here and now.
Powell’s post-meeting press conference has equally been perceived as on the hawkish side.
The Fed’s median Core PCE forecast is for 2.5% in 2025 (from 2.2% in the prior projection) and the unemployment forecast is 4.3% for 2025 (from 4.4% previously).
US bond yields rose sharply on the announcement and throughout the press conference.
The US 10yr yield rose +8.3bps to 4.48% (low 4.38%; high 4.50%) and 2yr +11.4bps to 4.35% (low 4.21%; high 4.36%).
Fed Funds pricing now has a cumulative -34bps of cuts for 2025, down from -47bps yesterday.
The first cut is now not fully priced until September 2025. The USD rose sharply with DXY up 1.0%.
In contrast, Chinese government bond yields stabilised near record lows, on reports the Peoples Bank of China (PBOC) has signalled to investors the rally has gone far enough for now.
The guidance suggests the yields find some support near current levels while the market looks for fresh catalysts from the macro data.
As flagged, the ASX is expected to open with selling pressure today.
On the calendar today:
-New Zealand 3Q GDP
-New Zealand ANZ Business Confidence
-Japan BoJ rate decision
-Eurozone Oct C/A balance
-UK BoE rate
-US 3Q GDP
-US 3Q PCE
-ANZ Bank ((ANZ)) AGM
-Elders ((ELD)) AGM
-Incitec Pivot ((IPL)) AGM
FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/
Corporate news in Australia:
-Charter Hall ((CHC)) and Hostplus now own majority stake in Hotel Property Investments ((HPI))
-Mesoblast ((MSB)) included in Nasdaq Biotechnology Index
-Moneyme ((MME)) secures $125m from iPartners to refinance debt and support growth
-Vulcan Energy ((VUL)) secures partial funding for its German lithium project
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2608.54 | – 51.65 | – 1.94% |
| Silver (oz) | 29.96 | – 1.02 | – 3.28% |
| Copper (lb) | 4.10 | – 0.05 | – 1.20% |
| Aluminium (lb) | 1.14 | – 0.00 | – 0.32% |
| Nickel (lb) | 7.14 | 0.00 | 0.00% |
| Zinc (lb) | 1.35 | – 0.01 | – 1.05% |
| West Texas Crude | 69.45 | – 0.32 | – 0.46% |
| Brent Crude | 72.97 | – 0.30 | – 0.41% |
| Iron Ore (t) | 104.73 | – 0.85 | – 0.81% |
The Australian share market over the past thirty days
| Index | 18 Dec 2024 | Week To Date | Month To Date (Dec) | Quarter To Date (Oct-Dec) | Year To Date (2024) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 8309.40 | 0.16% | -1.50% | 0.48% | 9.47% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| NST | Northern Star Resources | Upgrade to Equal-weight from Underweight | Morgan Stanley |
| PLS | Pilbara Minerals | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| S32 | South32 | Upgrade to Overweight from Equal-weight | Morgan Stanley |
| SFR | Sandfire Resources | Downgrade to Underweight from Equal-weight | Morgan Stanley |
| SIG | Sigma Healthcare | Upgrade to Add from Hold | Morgans |
| SPK | Spark New Zealand | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| TYR | Tyro Payments | Downgrade to Underweight from Equal-weight | Morgan Stanley |
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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CHARTS
For more info SHARE ANALYSIS: ANZ - ANZ GROUP HOLDINGS LIMITED
For more info SHARE ANALYSIS: CHC - CHARTER HALL GROUP
For more info SHARE ANALYSIS: ELD - ELDERS LIMITED
For more info SHARE ANALYSIS: HPI - HOTEL PROPERTY INVESTMENTS LIMITED
For more info SHARE ANALYSIS: IPL - INCITEC PIVOT LIMITED
For more info SHARE ANALYSIS: MME - MONEYME LIMITED
For more info SHARE ANALYSIS: MSB - MESOBLAST LIMITED
For more info SHARE ANALYSIS: VUL - VULCAN ENERGY RESOURCES LIMITED