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Energy companies (down 0.1 per cent) were also weaker, with Woodside losing 0.2 per cent and Santos shedding 0.1 per cent. Mercury NZ (down 3.7 per cent), Medibank Private (down 3.7 per cent) and Lottery Corporation (down 2.4 per cent) were also among the biggest large-cap decliners.
The lowdown
IG Australia market analyst Tony Sycamore said the gains on the local bourse came from a supportive tailwind on Wall Street overnight as well as domestic data.
“The NAB business confidence index improved to negative one, from negative eight, in December,” he said, adding sub-indices including final prices, employment and labour costs were softer: “a mix that will meet the RBA’s approval”, ahead of its first meeting of the year next month.
Overnight, most stocks rose on Wall Street to build on its all-time high reached last week.
The S&P 500 added 0.2 per cent. The Dow Jones topped 38,000 points after rising 0.4 per cent. The Nasdaq composite gained 0.3 per cent.
This coming week will have a rush of companies reporting their results for the last three months of 2023, with roughly 70 companies from the S&P 500 on the calendar. They include American Airlines, Intel, Procter & Gamble and Tesla.
Analysts are expecting companies in the S&P 500 to report an overall dip in earnings for the fourth quarter, down nearly 2 per cent from a year earlier, according to FactSet. If they’re right, it would be the fourth quarter in the last five where profits have fallen.
That big rally, which carried the S&P 500 to a record for the first time in two years, came largely on hopes that a cooldown in inflation will allow the Federal Reserve to cut interest rates several times this year. It would be a sharp turnaround from the last two years, when the Fed jacked its main interest rate drastically higher in hopes of slowing the economy enough to grind down high inflation.
Some stronger-than-expected reports on the economy recently have reinforced hopes that no recession is arriving, while also forcing traders to push out their forecasts for when the Fed will begin cutting rates. They overall see a less than 42 per cent probability that it could begin in March, down from more than 80 per cent a week ago, according to data from CME Group.
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But the expectation is still for the Fed to cut rates more this year than the three times it’s indicated.
Some upcoming reports on the economy could shift those expectations further. On Thursday, the government will give its first estimate for how strongly the economy grew during the last three months of 2023.
Economists expect it to show the economy is still growing, but at a slower pace than during the summer. That’s what the Federal Reserve wants to see because too strong an economy would keep upward pressure on inflation.
On Friday, the government will release the latest reading for the inflation gauge that the Fed prefers to use. Economists expect it to show inflation held steady at 2.6 per cent in December from a month earlier.
In stock markets abroad, indexes tumbled in China as worries continue about the strength of the recovery in the world’s second-largest economy. Stocks fell 2.3 per cent in Hong Kong to bring their loss for the young year to date to 12.2 per cent. Stocks also tumbled 2.7 per cent in Shanghai.
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Quote of the day
“Macquarie has been the biggest disruptor, setting the cat among the pigeons in the mortgage market in recent years … it’s not looking like it will slow down anytime soon,” said UBS head of Australian bank research John Storey as an outbreak of fierce competition between banks in the $2.1 trillion mortgage market appears to be cooling off.
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Future Fund chair Peter Costello says it is far too early to bank on interest rate cuts in Australia later this year, despite signs that inflation is easing, and that investors have likely been too optimistic.
With AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
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