Australian Share Market Continues to Slide, Prompting Investors to Reassess Rate Cut Expectations

In a continuation of its downward trend, the Australian share market has recorded its fifth consecutive session of losses. Investors have been adjusting their positions in response to uncertainties surrounding the timing of anticipated rate cuts. The benchmark index, the S&P/ASX200, closed 0.6% lower, shedding 46.6 points to settle at 7,346.5. Notably, the materials, energy, and real estate sectors exerted a drag on the market. The broader All Ordinaries index experienced a similar decline, slipping to 7,575.6.


Meanwhile, the Australian dollar remained steady, with no change at the closing bell, trading at US65.54c. On Wall Street, stocks also posted losses following cautious remarks by US Federal Reserve governor Christopher Waller, who emphasized the need for careful calibration and avoiding a rushed approach to rate cuts. Additionally, the release of fresh jobs data by the Australian Bureau of Statistics served as another factor impacting investor sentiment. This data revealed the shedding of approximately 65,100 positions, even though the jobless rate held steady at 3.9% in December.

Chief economist Paul Bloxham from HSBC noted that despite the decline in job numbers, the labor market was unlikely to witness a sudden drop-off in December. He mentioned that these figures indicated a gradual easing of job market conditions, a trend that has been ongoing for about 15 months. Bloxham further commented that these indicators, combined with the recently released monthly CPI (Consumer Price Index) data, support the view that the Reserve Bank of Australia (RBA) is likely to halt any further interest rate hikes and maintain a hold in February.


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In the United States, the tech-heavy Nasdaq and the S&P500 both recorded a decline of 0.6%, while the Dow Jones dipped 0.3% lower. Locally, the real estate sector, which is particularly sensitive to interest rates, performed worst, plummeting by 2.2%. Noteworthy individual stock losses included Pexa, which saw a decrease of 3.3% to $10.40, Dexus with a fall of 3.1% to $7.25, and Charter Hall, slipping by 2.9% to $11.19.

Additionally, materials stocks experienced a decline despite a rebound of 2.4% for the February contract of iron ore futures on the Singapore Exchange, reaching $US128.75 per tonne. The mining giant BHP, heavily weighted in iron ore, posted a 1.8% decrease to $45.73. This followed a second-quarter production decline of 2.2% in the commodity. BHP also anticipated lower earnings in its nickel division due to reduced prices.

In other company news, fuel retailer Ampol reported a 2.5% drop in stock prices, closing at $35.07 after revealing decreased refining volumes and margin at its Lytton refinery in Queensland during the December quarter. Surprisingly, despite this setback, Ampol predicted that its unaudited replacement cost operating profit for 2023 would exceed the record set in 2022. On another note, Liontown Resources suffered the largest decline on the market, plummeting by 10.7% to $1.215, its lowest point since July 2022. This decline came after lithium giant Albemarle announced its intention to sell its 4% stake in the company.


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Developments in the Australian share market continue to shape investors’ perspectives on the future direction of the economy. The ongoing downward trend has led to reassessments of expectations regarding potential rate cuts and has contributed to market volatility. As investors monitor the evolving landscape, the market’s performance will undoubtedly be influenced by a range of factors, including global economic indicators, policy decisions by central banks, and the performance of key sectors such as real estate and materials.

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