Australian Bond Exchange Weekly Newsletter
Friday 23 December 2022
ABE Weekly 23 December 22 PDF version
Key Points
- S&P/ASX200 rose this week on the back of the US market rally
- Ongoing concerns for inflation in 2023
- Further rates tightening by the RBA expected in 2023
- US CPI rate was 0.1 per cent for November, 7.1 per cent annualised, indicating slowing inflation in the US
- US two-year and 10-year bond yields widened Tuesday.
Australia
S&P/ASX200 rose on two consecutive days this week following gains on Wall Street. With a welcome break in last week’s losses, at 7152.50 (up 0.53 per cent) as of Friday morning.
Inflation currently stands at an annualised 7.3 per cent and it is expected that the RBA will keep fighting inflation in 2023.
The December 2022 Westpac-MI survey reported a 3 per cent lift in consumer sentiment; however, consumer sentiment is still at similar levels as it was during the pandemic and the GFC.
The December quarter CPI will be released by the ABS on 25 January 2023, and we will be looking keenly at this figure.
Global Markets
US Markets
Equities were up for two consecutive days this week. Bond yields stabilised after the spread between US two-year and 10-year bond yields widened to its widest level on Tuesday since 1982. This indicated that the economic outlook could become gloomier, with interest rates remaining at high levels, and a yield curve inversion. This could also pave the way for the US economy to enter a deep recession.
The CPI for All Urban Consumers (CPI-U) rose 0.1 per cent In November, (annualised rate of 7.1 per cent), which came in lower than expected. This could be an indicator that inflation may move to a manageable level and be moving past its peak. This was great news for markets, which responded well this week.
EU/ BOE
Last week, the European Central Bank increased its key interest rate from 1.5 to 2 per cent. We expect rate hikes to continue at a steady pace.
The BOE raised interest rates by 50 basis points last week as expected, taking the base interest rate to 3.5 per cent. This is the ninth rise since last December.
Contact us if you have any questions or would like any assistance.
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