Weekly Australia Market Wrap for the Week-ended 16 September 2022

The tug-of-war that markets appear to have been playing seemed to take a decisive turn this week when US inflation numbers were released on Wednesday night (AEST). The 8.3% (year on year) rise in US consumer prices was slightly lower than the previous month but above market expectations and saw a strong sell off in global markets as interest rate hikes and recession fears rose again to the top of investors' minds.

The US Fed is on track for another 0.75% rate rise (this coming Wednesday) as US Core Inflation (the rate that strips out volatile short-term prices) was far higher than expected at 6.13%. A number of economists however are taking the view that US inflation has seen its peak in this cycle.

The Dow Jones was down 4.13% for the week, the S&P500 was down 4.77% and the NASDAQ was down 5.48%. Australian shares had started the week in a strong position but were overcome by the weight of selling to lose 2.25% over the week. Japanese shares fell 2.3%, Chinese shares lost 4.16% and Eurozone shares were 2.4% lower.

US markets closed weaker on Friday night after FedEx reported earnings around $US300m below expectations and withdrew their annual guidance blaming worsening business conditions in Europe and the US. Deutsche Bank researchers didn't mince their words saying it was the weakest set of results "relative to expectations" they had seen in nearly 20 years analysing companies. The stock wiped out nearly two years of gains.

Bond yields in Australia rose sharply last week as higher short term interest rates for longer were factored in. 10y bonds were up 9 basis points to 3.72% while 3y bonds rose 27 basis points 3.19% to 3.46%. Australian dollar closed near its 2-month lowest level: below $0.675; as investors speculate the path of tightening monetary policy by US Federal Reserve and concerns of a global economic downturn.

The ASX sectors hardest hit were Real Estate (-5.36%), Health Care (-4.51%) and Consumer Staples (-4.29%). The $AUD was also sold heavily to finish 1.83% lower at $US0.6701.

In the interest rate sensitive real estate sector Vicinity fell 7.09% to $1.84, Goodman fell 6.56% to $17.80 and Shopping Centres Australia fell 8.15% to $2.48.

The messy takeover saga of Link Administration Services by the UK's Dye and Durham saw the stock fall heavily this week, down 22.89% to $3.47.

Atlas Arteria fell heavily after a $3.15bn rights issue on Wednesday. It closed the week down 17.21% to $6.59, just above the $6.50 price of the rights.

Pilbara Mining hit a record close of $4.59 this week continuing a great run since its recent low of $1.98 on 14 June, not long before announcing a very strong auction price for its lithium spodumene concentrate.

Long suffering AMP shareholders saw the stock rally 7.08% to $1.21. The stock has not been above $1.26 since June 2021 despite attempting to rally past there on five occasions since. Could this be the week

Another stock to watch this week is Computershare. Its shares closed at $26.01, up 5.6% on the week continuing its strong rally from a recent low of $22.85 on 12 August.

Oil prices continued to tumble from their recent highs of $US119.41 on 17 June. They closed the week down 1.94% to $US85.11.

Locally the RBA will release the minutes of its monthly meeting on Tuesday.

The week ahead focus will be dominated by interest rate decisions of the foremost central banks including Federal Reserve, Bank of England, and Bank of Japan. As well, further insights policy from PBoC will be put forth following China cut the Home-loan Prime Rate for the second time this year. Investors are also watching the September PMI figures for US, UK, Euro zone, France, Germany, Australia, and Japan.

The Australian Securities Exchange will close on Thursday September 22 as a result of a National Day of Mourning following the death of Queen Elizabeth II.