Australian stocks face an uncertain start to the new year as traders weigh a positive session in Europe overnight against a sharp drop in Chinese factory activity and weak indications from Wall Street.
European stocks rallied in the first trading session of 2023 and shrugged off a soft end to 2022 in the US. Wall Street reopens tonight after the New Years break.
Factory production at Australia’s main trading partner shrank at the fastest pace in almost three years, according to data released over the weekend.
The Australian futures market has not been traded since Friday. The SPI200’s closing gain of 32 points, or 0.45 percent, reflects a modest rise in the ASX 200 from the last session of 2022.
Europe and Wall Street
Hesitant optimism about a manufacturing recovery helped European stocks start the new year with solid gains. The pan-European Stoxx 600 rose 0.96 percent overnight as a survey suggested European factory production may have bottomed.
The S&P Global finale manufacturing The purchasing managers’ index improved to 47.8 last month from 47.1 in November. Input and output prices fell from recent highs in a sign of a slowdown in inflation.
“The outlook has brightened amid signs of healing in supply chains and a significant moderation in inflationary pressures, as well as a calming of concerns over the region’s energy crisis, thanks in part to government support,” said Chris Williamson, chief economist at S&P Global Market Intelligence.
“The number of optimists for the coming year has now outnumbered pessimists for the first time since August, indicating steady improvement in business confidence,” added Williamson.
GermanyThe DAX index gained 1.05 percent as bond yields fell from their highest level in more than a decade. France’s CAC 40 index rose 1.87 percent. London and New York were closed for New Year’s holidays.
US stocks ended their worst year since 2008 with a round of modest losses on Friday. That S&P500 down ten points or 0.25 percent. That Dow Jones industry average Lost 74 points or 0.22 percent. That Nasdaq Composite gave up 12 points, or 0.11 percent.
Market sentiment remained bearish as investors took tax losses at the end of the most difficult year since Big financial crisis. Stocks plummeted in 2022 amid headwinds including the war in Ukraine, a blast of inflation, rising interest rates and China’s struggles with Covid.
The S&P 500 closed with one annual loss of 19.4 percent. The Dow lost 8.8 percent and the Nasdaq 33.1 percent.
energy was the only sector to gain for the year, boosted by the aftermath of the war between Ukraine and Russia. growth industries suffered the most. Communication services collapsed by more than 40 percent.
A new year is unlikely to bring immediate relief to global equity markets, according to Art Cashin, UBS’s influential director of floor operations.
“I’d like to tell you that it’s going to be like the ‘Wizard of Oz’ and everything will be in glorious colors in a moment or two,” Cashin told CNBC’s The Exchange.
“I think we may have a bumpy first quarter and it may take a little longer depending on the Fed.”
Australian outlook
There will be no lead from the futures markets until the SPI200 resumes trading at 9.50am AEDT this morning. However, last night’s European gains could be enough for an encouraging start to 2023 despite other negative factors.
China factory activity under contract for a third month when Covid outbreaks halted the factory’s production lines. The official manufacturing PMI fell to 47 last month from 48 in November, data released over the weekend showed.
The drop in activity was the largest since February 2020. A separate measurement by activity in the service sector fell to 41.6 from 46.7 in November.
“The weeks leading up to Chinese New Year will remain challenging for the service sector as people are reluctant to go out and spend more than necessary for fear of contagion,” Mark Williams, chief Asia economist at Capital Economics, told Reuters.
“But the outlook should brighten around the time people return from the Chinese New Year holiday – infections will have gone down and a large proportion of people will have had COVID recently and feel they have some level of immunity to have.”
Adding to concerns over the bank holiday weekend was a gloomy outlook for the year IMF. Chief Executive Kristalina Georgieva said 2023 will be a tough year as the world’s three largest economies – the US, Europe and China – all lose momentum.
“For the first time in 40 years, China’s growth in 2022 is likely to match or lag global growth,” said Dr. Georgieva. “The impact on global growth will be negative,” she added.
That S&P/ASX200 closed 2022 with a modest rally on Friday. The Australian benchmark rose 19 points, or 0.26 percent, to trim its annual loss to around 5.4 percent.
consumer goods was the best-performing sector in Europe overnight, rising around 1 percent. Automotive and luxury goods companies outperformed.
Technology Stocks also recovered. energy rose 1.8 percent as crude oil prices improved (more below).
The Australian dollar down 0.1 percent to 68.09 US cents this morning.
A light domestic economic calendar This week includes construction and job listings on Wednesday and service sector activity on Friday.
Wall Street has a much busier week. The new year brings the manufacturing job listings and job listings and minutes from last month’s Federal Reserve meeting on Wednesday night. Thursday brings more work samples in the form of jobless claims and personal payslips before Friday night’s main event, the December jobs report.
IPOs: A predictably narrow week for new entries has only one possible starter. UK-based supplier of high-quality metals Dynamic Metals is expected to go public on Friday.
Australian unit and Sietel trade ex-dividend on Thursday.
raw materials
oil rallied overnight as the tailwinds that fueled gains in 2022 continued to embolden buyers. Brent crude rose $2.45, or 2.9 percent, to $85.91 a barrel.
iron ore ended 2022 at the highest level in more than six months as buyers expected improved demand ahead of the Lunar New Year holiday later this month.
The most traded May ore in China Dalian Commodity Exchange rose 2.8 percent to 863 yuan ($124.14) a ton on Friday. Previously, the price reached 867.50 yuan, the highest since June 9. During the year, Dalian ore rose 43 percent.
BHPUS-traded depositary receipts fell 0.31 percent on Friday. The miner’s UK listing lost 0.27 percent. Rio Tinto rose 0.15 percent in the US after losing 0.62 percent in the UK.
gold ended the year near a six-month high on subdued trading. Gold for February delivery was 20 US cents, or less than 0.1 percent, up at $1,826.20 an ounce. The NYSE Arca Gold Bugs Index was down 0.46 percent.
Over the bank holiday weekend, the price of the yellow precious metal rose in e-commerce. Spot gold rose $3.90, or 0.2 percent, to $1,830.10 an ounce this morning.
copper and most other base metals declined on Friday as fears of a global recession dampened demand. Benchmark copper on the London Metal Exchange slipped 0.55 percent to $8,372 a ton.
Aluminum fell 1.12 percent, nickel 0.7 percent, zinc 0.4 percent and tin 0.43 percent. Lead rose 0.9 percent.
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