Weekly Australia Market Wrap for the Week-ended 3 March 2023

There were positive price gains in global equities last week as markets hoped that already priced in interest rates hikes would be enough to quell inflation.

The S&P500 in the US was 1.9% higher, the Dow Jones rose 1.75% and the Nasdaq rose 2.58% while shares in Europe rose around 2.4%, China shares rose 1.7% and Japanese shares also rose 1.73%. Hong Kong lifted 2.79%.

Australia failed to take the positive lead and fell modestly with the S&P/ASX200 down 0.32% and the broader All Ordinaries Index down 0.38%.

Sector gains in Energy (+6.12%), Materials (+2.71%) and IT (+1.82%) were offset by losses in Real Estate (-2.19%), Financials (-2.34%) and Health (-1.68%).

Financials were hit quite hard as markets braced for the RBA meeting on Tuesday March 7 where it appears likely to raise interest rates for the 10th time to a forecast 3.60%. CBA fell 3.43%, Westpac slipped 4.15%, ANZ dropped 3.79% and NAB fell 2.25%. The chance of a recession in Australia is rising and banks are in the bad debt front line. A number of analysts are saying the RBA has done enough to quell inflation and perhaps over-reacted to the December quarter CPI figure so a further rate rise this week might be seen as a bit heavy-handed.

Woodside was the pick of the energy stocks rising 9.22% after the release of its half-year results. Santos rose strongly climbing 6.02%.

The iron ore trio all rose with BHP (+5.18%), Rio Tinto (+6.32%) and Fortescue (+4.93%) leading most material stocks. Gold was strong closing up 2.45% to USD$1855.25 an ounce. Newcrest lifted 6.46%, Bellevue Gold rose 13.57% and Gold Road Resources lifted 4.15%.

Lithium stocks were the most popular bets of 2022 but have been very choppy of late. Last week however Liontown Resources was back in favour rising 19.41% to 1.63 on no fresh news. Pilbara Minerals dropped 5.25% but Allkem rose 4.30%, IGO rose 3.12% and Mineral Resources lifted 5.31%.

Qantas continued to rise after the previous week's solid half-year result closing up 5.61%. Flight Centre benefited from a strong mid-year bookings and rose 2.06%. Webjet rose a modest 1.03%.

Kogan’s half-year results showed that it was getting profitability "back on track". Its shares rose rose 23.68% despite news late in the week that its shares would be removed from the S&P All Technologies Index. Accent Shoes jumped 7.40% but most other retail stocks were sold off. Temple & Webster dropped 3.4%, Lovisa fell 4.00% and Harvey Norman shed 11.24%.

On the economic data front Eurozone February inflation fell less than forecast to 8.5% year on year (yoy) while core inflation rising to a new high 5.6% yoy. Signs that China's economy was bouncing back were seen in the Purchasing Manufacturers Index and a raft of weekly data on traffic, flights etc. In Australia housing indicators are weak while Retail Sales have not recovered from their large 4% drop off in December.

In the coming week Central Banks in Japan and Canada are likely to leave rates on hold, Chinese Feb Trade Data will be released (Tue) and its CPI on Thursday.

Should the RBA increase rates again on Tuesday it will take the rise in mortgage repayments to almost $14.500 a year on a $600k mortgage which will likely provide a dampener on economic activity.