ASX News LIVE | ASX to Fall as Markets Extend Losses, Oil Rises with Escalating Tensions in MidEast

The ASX 200 fell by -0.39% to 7,494.1 today, mirroring losses seen overseas as markets face the hangover after the New Year rally.

Pundits seem to have gone off the idea that rate cuts would be coming sooner than the Fed has said, creating a cold feet moment for the bullish sentiment found just a couple of weeks ago.

Only the Energy (+1.31%) sector showed life today as tensions in the Middle East pushed oil prices up over 3%, the largest daily gain since November last year.

The biggest losses were seen in the Staples (-0.98%) and Materials (-0.78%) sectors.

The biggest gainer today was WA1 Resources, which jumped 21.32% on the ASX 200, while Arcadium Lithium fell by -9.20%, the biggest loss.

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Editor Nick Hubble has done a deep dive into the inner workings of the Japanese Central Bank, and he doesn’t like what he sees.

The battle over their artificially low yield curves could soon be coming to an end, to the detriment of the yen.

As he put it:

‘The Bank of Japan could raise interest rates to contain inflation and the currency crash. But this would make the government’s budget untenable, causing a crash in the yen, Japanese bonds and the economy anyway.

If the Bank of Japan continues on its current path of financing the government in the face of inflation and a plunging yen, the pressure on the currency will only grow, causing it to fall even further. Any attempt to constrain this always fails eventually, making it a matter of time. Whether the yen trends down steadily like it did over the past two years, or lurches lower as the central bank loses control of currency pegs, the yen is going lower.’

Read more on this below:

How Kamikaze Central Banking Could Activate the Widowmaker Trade, At Last

China’s ascent to the top of the economic heap is facing some unexpected roadblocks, putting a brake on its coronation as the world’s biggest powerhouse.

Wells Fargo analysts cite internal challenges like a shrinking population and a wobbly real estate market, coupled with external pressures like geopolitical tensions and shifting supply chains, as culprits for the slowdown, saying:

‘China’s structural challenges and vulnerabilities combined with tense geopolitical relations are taking a greater toll on the economy than we previously expected and earlier than originally anticipated. So, while China’s rise to the world’s largest economy is inevitable, reaching the top of the economic throne will likely take longer than we previously estimated.’

While China’s eventual economic dominance remains inevitable in their eyes, their estimated arrival at the summit has been pushed back a decade, from 2032 to 2042.

On the other end of the equation, the US economy has surprised with its own resilience, contributing to China’s delayed ascent.

So, buckle up for a longer climb and witness a more competitive race for the economic crown.

The ASX 200 is down -0.33% at midday, trading at 7,498.4.

As tensions ramp up in the Middle East, rising oil prices have helped oil and fuel producers, with Ampol’s shares rallying, up 1.57%.

Woodside Energy has also gained 1.36%, and Santos is up 1.2% in trading so far today, while other sectors fared worse.

Staples and Financials are the worst performers so far today, with only the Energy and Industrial sectors in the green.

In company news, Westgold Resources (-0.72%) announced today that it was on track to deliver its production guidance of 245-265k ounces.

Here is a good look at history to see where bond yields could be headed.

The Fed admitted last night in its minutes that rates were likely ‘at or near their peak‘.

So what does that mean for bond yields? They could be at or near a peak themselves.

Remember, the past isn’t always indicative of the future, but US 10-year treasury notes are worth watching if you’re investing.

Source: The Daily Shot – Oxford Economics

Good morning. Charlie here

The ASX 200 opened down -0.31% to 7,499.7 as markets extended their losses in the new year. With the end-of-year rally now behind us, it is hardly surprising that we have entered into a consolidation phase, but geopolitical threats have traders sitting back.

The Fed minutes were also released overnight, which added to the story of ‘market expectations vs Fed reality’.

Bulls are arguing that rate cuts are coming far sooner than the Fed is predicting, while the Fed is attempting to maintain a bulwark of consistent strong messaging to say cuts aren’t coming any time soon.

The ‘short and sweet’ of the Fed’s minutes can be summarised as:

• Fed views rates likely ‘at or near the peak’
• Fed officials maintain 2% inflation target
• Rates are likely to remain restrictive for some time
• ‘Clear progress’ has been made on inflation
• The Fed acknowledged rate cuts by the end of 2024

Oil prices jumped over 3% overnight, its biggest daily gain since November as around 100 people were killed in a terrorist attack in Iran.

Israel has denied any involvement, but this, combined with the drone strike that killed the Hamas deputy leader in Beirut yesterday, has many concerned about a wider war in the Middle East.

Wall Street: Dow -0.76%, Nasdaq -1.18%, S&P 500 -0.80%.

Overseas: FTSE -0.51%, STOXX -1.43%, Nikkei -0.22%, SSE +0.17%

The Aussie dollar fell -0.49% to US 67.28 cents.

US 10-year bond yields fell -1bps to 3.92%. Australian 10-year bond yields +3bps to 4.03%.

Gold fell -0.88% to US$2,041.46. Silver fell sharply -2.74% to US$22.99.

Bitcoin reversed its gains, falling -4.90% after spiking on rumours on ETF adoption.

BTC is currently at US$42,776, while Ethereum fell by 6.47% to US$2,205.

Oil Brent rose +3.45% to US$78.51, while WTI Crude rose +3.81% to US$73.06.

Iron ore continues its gravity-defying rise +0.6% at US$142.55 a tonne as Chinese steelmakers run through their state support.

It seems Iron ore futures are betting on another round of stimulus for China’s flagging property sector as Beijing officials struggle to find any other levers to pull to stimulate their lop-sided economy.

‘Concerns about its property market are still lingering, and we expect this to continue in 2024,’ said ANZ’s Ms Kumari.

 

‘It is getting offset by some of the increased infrastructure spending and the revival in manufacturing sector we are going to see.’

 

‘But optimism is going to fade in the second half, and then we will start seeing a significant decline in iron ore prices because of the economic slowdown expected that will weigh on steel demand in China.’