ASX News LIVE | ASX 200 to Fall, Markets Lose Momentum as High US Inflation Data Spikes Bond Yields

That’s all from me this week, have a great weekend!

Looking ahead to next week, we have:

-CPI data out from NZ on Tuesday

-RBA meeting minutes on Tuesday

-Retail sales in the US Tuesday night AEST.

– GDP data for China Wednesday

-CPI data from the UK and Europe on Wednesday

-Employment data for Australia on Wednesday

-Fed Chair Jerome Powell speaks Friday

For now, I’ll leave you with this Bing AI-generated image of today’s CPI data.

How likely are late-cycle soft landings for economies?

Here is a great collection of historical data to give you some insight into the past. Note that many of the soft landings in the past required inflation to come under control quickly. Despite the latest CPI data uptick, the US and, as a consequence, Australia appear on the right path.

🇺🇸 IMF: Soft Landing not a foregone conclusion yet

Cycles ending in hard landings usually were accompanied by high inflation expectations, which is not currently the case. And excessively easy monetary policy (negative real rates) was not required when the landing was soft… pic.twitter.com/TWcSA9P4J3

— Nikolay Kolarov, CFA (@libertniko) October 11, 2023

The ASX 200 finished the day down -0.56% to 7,051.0 As it followed Wall Street down after higher-than-hoped US CPI data sparked fears of overreaction from the Fed in its next meeting.

Fears of potential interest rate hikes have been the primary fixation of markets since the ‘higher for longer’ rhetoric was employed after the September Fed meeting, which kept rates on hold but signalled longer interest rates than the market was expecting.

US CPI data pointed towards high fuel costs flowing through to intermediate product costs from producers that bled into prices. Now oil volatility has eased somewhat since the attack on Israel sent prices spiking, there is hope by some that prices may ease. There still stands a risk of the conflict escalating as Israel prepares for its attack on Gaza, with some fearing a wider escalation after the move. Ray Dalio, Founder of Bridgewater, the world’s largest hedge fund, included that as one of his largest fears in his latest thought piece.

Meanwhile, CPI figures of 0% re-sparked fears of deflation within China as even the heavy spending of the Golden Weekend holiday was not enough to bolster prices. China has signalled it intends to intervene in the market with stimulus but so far has only committed relatively small sums to the problem.

All Ords fell 0.60% finishing at 7,243.5

Nine of the eleven sectors were down today, with only Healthcare (+0.51%) and Utilities (0.33%) up.

CSL (+1.59%) recovered some of its losses after two days of heavy selling, but still ended the week down nearly 3%.

Inflation-sensitive sectors Info Tech and Real Estate were the worst hit today with both down around 1.9%.

Goodman Group fell 1.56%, while Wisetech fell 1.64% and Xero closed down 2.72%.

With slightly higher than expected inflation data out of the US, here are the changing expectations of the Fed’s rates going forward.

It’s good to remember that these can change on a dime, but it’s a good barometer of how the market feels the Fed is looking at the problem of inflation right now.

If we see a substantial move in employment numbers between now and the end of the year, expect this curve to come down a lot sharper.

Source: CharlieBiello – Creative Planning

The latest data on arrivals and departures out of Australia is out, and it shows things are getting back to normal.

The number of people leaving our borders is at its highest level since COVID-19 restrictions shut borders, with numbers nearing pre-pandemic levels.

For arrivals, we are still short the August 2019 highs but are quickly nearing those numbers.

The most common arrivals are people from the USA and New Zealand and, after restrictions were eased there later, people from China.

Source: Australian Bureau of Statistics

China’s consumer price index for September came in at 0%, lower than the expected 0.2% increase that analysts predicted in the Reuters poll of economists.

China also reported a 2.5% decline in its producer price index, compared to the expected 2.4% drop.

The results highlighted just how slow the Chinese recovery has been, as consumer spending remains flat as capital flows out of the country.

In a recent ruling, China banned new offshore brokerage accounts in an attempt to plug the holes left by its previous forex controls to try to stem the flow of capital outside of the country.

Source: Bloomberg

Foreign holdings of Chinese equities and debt have fallen by approximately US$188 billion or 17% from December 2021 through to June.

The mass exodus coincides with China’s economic slump due to years of Covid restrictions, a property market crisis, and persistent tensions with the West, which has turned away investment that now focuses on ‘friendshoring‘.

This is where Western-allied countries and policymakers focus on bringing supply chains to friendly countries to avoid similar issues to Australia’s tariffs on barley and wine by China. The 2020 80% tariff on barley was lifted in August this year, giving some hope to winemakers. However, the wine tariff remains, leaving wine growers with an estimated 2.8 billion bottles of surplus wine.

In recent months, China’s ‘Wolf warrior diplomacy’ has waned as the country realises it has supremely backfired and pushed many of its major trading partners into closer economic ties with the West.

With the latest data out, China is staring down the risk of deflation once again. Chinese officials have signalled that they are looking at large stimulus moving forward, but details are yet to be announced beyond a paltry increase in their stakes in the big four Chinese banks.

Here’s a quick breakdown of the market movers around midday. The ASX 200 is down 0.31%, trading at 7,069.3.

Real Estate is the worst-hit sector, down 1.45%, while Healthcare is up 0.94%.

Australian shares are following Wall Street lower at midday after higher-than-expected US inflation data renewed bets that the Federal Reserve is not yet done lifting interest rates.

In this special episode of What’s Not Priced In, Greg shares a recent interview he did with South Australian Senator Alex Antic.

Main topics: AI energy consumption is soaring and what that means for energy in our future.

In a recent episode of the Last Optimist podcast, host Mark Mills interviewed the Chief Technology Officer of AI chipmaker Techno Wizard. The CTO showed a graph predicting that by 2040, AI machines will consume roughly the same amount of energy as the US consumes today for all other purposes.

This is a staggering amount of energy, and it’s important to be aware of the implications. AI has the potential to revolutionize many aspects of our lives, but it’s important to make sure that we develop and use it in a sustainable way.

This kind of energy use is going to require some rethinking of energy policies, and we explore those ideas here.

https://www.moneymorning.com.au/20231013/whats-not-priced-in-special-episode-if-i-wanted-to-destroy-an-economy.html

Sky TV [ASX:SKT] has seen its shares spike by 15.5% in this morning’s trading after the company announced it has paused its share buyback program because it is in discussions with a potential interested party.

Sky has confirmed that is has received an expression of interest from an unnamed third party to buy out the company but says the discussions are still in very early stages.

Sky Network Television is a provider of multi-channel, pay television and free-to-air television services in New Zealand that has in the past, struggled to maintain viewers as streaming services took market share.

Earlier in the year, the company managed to boost its subscription numbers but blamed higher costs of programmes and new hardware offsetting these gains and bringing down profits.

The Australian tech giant Atlassian has made a big strategic move today by investing a significant portion of its cash reserves in acquiring Loom, a prominent video messaging platform, for AU$1.5 billion.

This acquisition is seen as a response to the global shift towards hybrid work environments, aiming to enhance Atlassian’s collaboration tools.

Loom is a video collaboration tool that allows users to capture their screens, cameras, and microphones, facilitating the sharing of videos among dispersed teams. Integrating Loom into Atlassian’s suite of workflow tools, including its flagship products, Jira and Confluence, will bolster the company’s collaborative capabilities.

Atlassian structured the agreement with US$880 million in cash and the remainder in stock. As of August, the company boasted a substantial cash reserve of around US$2.1 billion. However, the market response to this move was mixed. Atlassian’s shares, listed on the Nasdaq, experienced a decline of almost 7%, dropping to US$186.40.

This downturn in stock value coincided with Atlassian facing a security vulnerability in its software, potentially exploited by Chinese hackers, adding an additional layer of challenge for the company.

Despite these challenges, Atlassian is forging ahead with its plans to integrate Loom’s capabilities into its existing offerings. With over 25 million users already utilising Loom’s services, Atlassian envisions integrating Loom’s asynchronous video product across its customer base to corner hybrid work market share.

ASX 200 falls 0.68% at open after US inflation data renews bets on Fed rate hikes

The Australian stock market sank at the open today, tracking losses in Wall Street, after the latest US inflation data renewed bets that the Federal Reserve is not yet done raising interest rates.

All Ordinaries index was also down 0.7%.Rate-sensitive sectors were among the worst performers, with Real Estate the worst-hit of the 11 sectors, down -2%. Utilities stocks were the only sector to move higher in early trade, up 0.17%.

Meanwhile, the Australian dollar plunged 1.6% overnight below US64 cents and is trading at around US63.13 cents.

The dollar spot index leapt 0.7%, and the US dollar was set to post its best session in five weeks and snap a six-day losing streak.

Looking ahead, CPI and PPI data from China will be released at midday.