The ASX has finished lower at market close, off the back of the US Federal Reserve lifting interest rates for the ninth consecutive time, increasing its cash rate by 0.25 percentage points and taking rates to their highest level since the global financial crisis.
Wall Street initially rebounded at the rate hike decision, but finished lower for the day after Fed chairman Jerome Powell said the country's banking system was "sound" in the wake of the collapse of Silicon Valley Bank and Signature Bank.
Look back at the day's financial news and insights from our specialist business reporters on our blog.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Here's how the market ended up as of 4:20pm AEDT
By Kate Ainsworth
- ASX 200: -0.67% to 6,969 points
- All Ords: -0.72% to 7,148 points
- Australian dollar: +0.8% to 67.39 US cents
- Dow Jones: -1.6% to 32,030 points
- S&P 500: -1.7% to 3,936 points
- Nasdaq: -1.6% to 11,669 points
- FTSE: +0.4% to 7,566 points
- EuroStoxx: +0.3% to 4,915 points
- Brent crude: -0.8% at $US76.08/barrel
- Spot gold: +0.38% to $US1,977/ounce
- Iron ore: -2.7% to $US120.20/tonne
- Bitcoin: +0.38% to $US27,444.93
ASX finishes the day lower
By Kate Ainsworth
The markets just didn't pick up in the end, with the ASX dropping 0.67% to 6,969 points and dipping below its 200-day moving average.
All but one sector finished in the red — the only sector that gained was consumer non-cyclicals, up 0.10%.
The biggest loss on the market came from Polynovo Ltd, finishing down 11.59%, with Lake Resources and Megaport dropping by 8% each.
As for the top movers — United Malt Group finished on top, picking up 6.13%, while Life360 gained 3.48%, and Brickworks continued riding the high from their half-yearly profit announcement, finishing up 2.86%.
And that brings this market blog to a close for this Thursday — but don't worry, I'll be back bright and early to do it all again tomorrow.
See you then!
Household wealth falls by 3 per cent since last year
By Kate Ainsworth
New data from the ABS released today show that household wealth in Australia has fallen for the third consecutive quarter, declining by 0.4% (or $57 billion) in the December 2022 quarter.
Australia household wealth is now sitting at $14.4 trillion, but the ABS's head of finance and wealth statistics, Mish Tan, says that is 3% lower than the December 2021 quarter.
"This is largely due to falling residential property prices, as rising interest rates lower demand and household borrowing capacity," Dr Tan said.
So how much did residential land fall by?
In the December quarter, the value dropped by $260 billion, or 2.7%, and contributed to the overall decline in household wealth by 1.8%.
But the fall in household wealth in the December quarter was buoyed by rising superannuation assets due to rallying share market — super assets were up 3.6% ($120 billion).
That said, compared to December 2021, superannuation balances have shed $247 billion, or 6.7%.
Meanwhile, household deposits have grown by $32.3 billion, with $623.3 billion now invested in savings and fixed-term deposits, and other non-transferrable deposit accounts — largely thanks to rising interest rates.
Will the RBA raise interest rates again next month? One economist says yes
By Kate Ainsworth
David Bassanese, the chief economist at BetaShares says he's expecting the RBA to lift the cash rate by 0.25 percentage points next month — but they'll then press pause.
He's put out a statement this morning in the wake of the Fed's move to lift rates overnight, but says he's maintaining his position that the RBA will hike again on April 4.
"As for Australia, the Fed’s decision to raise rates — and following the ECB’s similar decision last week — suggests concerns over global financial instability should not be a barrier to the RBA raising rates again in April," he said in a statement.
"Instead, the RBA will base its decision on the run of local economic data – which so far at least has remained on the firm side, especially the 60,000 bounce back in employment during February.
"My base case remains the RBA will raise rates once more in April and then signal a pause.
"This depends on a still reasonably firm retail sales and monthly CPI report next Tuesday and Wednesday respectively."
All eyes will be on that data next week, then 👀
Could the US banking crisis head off an Australian mortgage disaster?
By Kate Ainsworth
It's happened once before — a US banking crisis bailed out over-indebted Australian home owners. But is it about to happen again?
My colleague Michael Janda has posed that very question off the back of the Fed's rate rise and projected pause, and what it might mean for the RBA and mortgage holders next month.
Curious? You can read all about it below:
Jake Paul, Lindsay Lohan fined after Chinese crypto entrepreneur charged with fraud
By Kate Ainsworth
You probably wouldn't expect to see Jake Paul or Lindsay Lohan in a typical markets blog, but bear with me — I promise it'll make sense in a minute.
While we're discussing cryptocurrency and the SEC, Chinese crypto entrepreneur Justin Sun has been charged with fraud — and a handful of US celebrities have been accused of illegally promoting Sun's crypto assets.
The SEC has accused Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry of having schemed to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT) since August 2017, and artificially inflated their trading volume.
Sun has also been accused of concealing payment to celebrities to promote the crypto assets on social media, which the SEC says misled the public into thinking they had "unbiased interest" in the crypto assets.
The SEC says Sun's activity generated tens of millions of dollars in illegal profit at the expensive of other investors.
So where do Jake Paul and Lindsay Lohan come in? They were some of the celebrities who helped promote the crypto, along with singers Akon, Austin Mahone, Ne-Yo, Lil Yachty, Soulja Boy and porn actress Kentra Lust.
All but Soulja Boy and Mr Mahone have agreed to settle without admitting wrongdoing and paid more than $597,000.
Still with me and want to know more? Look no further than the link below:
SEC threatens to sue cryptocurrency exchange platform Coinbase
By Kate Ainsworth
The US Securities and Exchange Commission (SEC) has threatened to sue crypto exchange platform Coinbase over some of its products.
Coinbase's shares slipped by nearly 13% in extended trading to $US67.33 after confirming it had been issued a Wells notice by the SEC — or a formal declaration that SEC staff intend to recommend an enforcement action.
Coinbase says that the potential legal action is linked to parts of its spot market, and its "Earn, Prime and Wallet" products.
The SEC has been increasingly trying to crack down on the largely unregulated crypto market since FTX imploded last year.
Coinbase says its services will continue to operate as normal despite the notice being issued.
ASX remains low at lunchtime
By Kate Ainsworth
The ASX is still tracking lower in the middle of the trading day, with all sectors still firmly in the red.
Out of the top 200 companies, 149 of them are sitting in the red, with 46 trending up, and the remaining five staying neutral.
United Malt Group and Brickworks are still the best performers so far, they're both up about 3.6% each.
Polynovo's day of trading hasn't gotten any better, either — the company which develops medical devices to treat burns and surgical wounds is down nearly 14%.
That change can be attributed to its chairman, David Williams selling 4,750,000 of his shares in the company, as per an ASX announcement this morning.
Megaport and Nanosonics are also shedding their value, they're down 7.6% and 6% respectively at lunch.
Here's how the market is tracking as of 12:30pm AEDT
By Kate Ainsworth
- ASX 200: -0.7% to 6,968 points
- All Ords: -0.7% to 7,150 points
- Australian dollar: +0.4% to 67.10 US cents
- Dow Jones: -1.6% to 32,030 points
- S&P 500: -1.7% to 3,936 points
- Nasdaq: -1.6% to 11,669 points
- FTSE: +0.4% to 7,566 points
- EuroStoxx: +0.3% to 4,915 points
- Brent crude: -0.6% at $US76.26/barrel
- Spot gold: -0.01% to $US1,969.39/ounce
- Iron ore: -2.7% to $US120.20/tonne
- Bitcoin: -0.2% to $US27,350.63
Watch: How SVB is impacting tech start-ups in Australia
By Kate Ainsworth
It isn't just the US banking sector that's been left reeling from the collapse of Silicon Valley Bank — it's also hitting technology start-ups right here in Australia.
My colleague Nassim Khadem has spoken to a number of Aussie tech start-ups who are trying to prepare for what comes next now SVB has collapsed.
You can watch her story below:
BHP and Hatch to design electric smelting furnace to produce steel using renewable energy
By Kate Ainsworth
Mining giant BHP and engineering firm Hatch have signed an agreement to design an electric smelting furnace (ESF) plant to reduce the amount of carbon dioxide generated from steel production.
BHP says the pilot facility would test and optimise production of iron, with the ESF able to produce steel from iron ore using renewable energy and hydrogen, to replace coking coal.
"Estimates show that reductions of more than 80 per cent in CO2 emission intensity are potentially achievable processing Pilbara iron ores through a DRI-ESF pathway, compared with the current industry average for the conventional blast furnace steel route," BHP and Hatch said in a joint statement.
As for where the facility is, neither BHP nor Hatch have said, but will look at "several locations" across the country, based on "supporting infrastructure, technology skills, and the availability of local partnerships to build and operate the facility".
"We see the ESF process as a critical breakthrough in significantly reducing the carbon emissions intensity of steel production and one that provides an opportunity for iron ore from our Pilbara mines," BHP's Chief Commercial Officer Vandita Pant said.
"The steel industry has identified the ESF as a viable option to use a wider range of raw materials and steel companies globally are looking to build commercial-scale ESF plants as part of their CO2 emission reduction roadmaps."
It's a sea of red in the sectors this morning
By Kate Ainsworth
Zooming out to how the sectors are tracking on the ASX so far, it's red on red on red, which isn't surprising since it's been trading lower since markets opened an hour ago.
Industrials and academic and educational services have dipped by more than 2% each, while the real estate and basic materials sector have shed 1.2% and 1.3% respectively.
Healthcare, consumer cyclicals, energy, financials, consumer non-cyclicals and utilities are also in the red, but have shed less than 1% so far.
Resources and mining are the biggest movers so far
By Kate Ainsworth
Now markets are open, the big movers so far are in resources and mining — although a malting company has had the biggest surge so far.
The five top movers are:
- 1.United Malt Group, up 5.5%
- 2.Northern Star Resources, up 2.7%
- 3.Silver Lake Resources, up 2.3%
- 4.Perseus Mining up 2.3%
- 5.Evolution Mining, up 2.1%
Plus an honourable mention to Brickworks — they're the sixth biggest mover so far this morning, up 1.7% thanks to their half-yearly profit result (there's more on that a little further down).
Meanwhile at the other end of the scale, it's a bit of a mixed bag with the bottom five movers:
- 1.Polynovo, down 9.7%
- 2.Block Inc, down 5.2%
- 3.National Storage REIT, down 4.4%
- 4.Syrah Resources, down 4.2%
- 5.Lake Resources, down 4%
Here's how the market looks at 10:20am AEDT
By Kate Ainsworth
- ASX 200: -0.7% to 6,964 points
- All Ords: -0.8% to 7,145 points
- Australian dollar: +0.2% to 66.94 US cents
- Dow Jones: -1.6% to 32,030 points
- S&P 500: -1.7% to 3,936 points
- Nasdaq: -1.6% to 11,669 points
- FTSE: +0.4% to 7,566 points
- EuroStoxx: +0.3% to 4,915 points
- Brent crude: +0.7% at $US75.88/barrel
- Spot gold: -0.1% to $US1,968.10/ounce
- Iron ore: -2.7% to $US120.20/tonne
- Bitcoin: -0.2% to $US27,361.55
US regulators not looking to provide 'blanket' deposit insurance, Yellen says
By Kate Ainsworth
It wasn't just the Fed's decision that rattled Wall Street overnight — comments by US Treasury Secretary Janet Yellen in a Senate subcommittee also played a part.
She told lawmakers that the Federal Deposit Insurance Corporation (FDIC) wasn't considering "blanket insurance" for banking deposits to shore up the banking sector, despite recent turmoil thanks to SVB and and Signature Bank's failures.
"I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits," she said.
"You know what I'm focused on right now is trying to stabilise the banking system. And I know our banking system to be sound.
"And I think right now we need to focus on improving the confidence of the public, that we do have a sound banking system and we can debate in the days ahead whether or not $250,000 is the right level for deposit insurance or whether that system could be should be changed in some way.
"I'm not going to weigh in on it. I believe there's plenty of time to have reasoned discussions about that."
Brickworks posts record half-year profit of $410 million
By Kate Ainsworth
Australia's largest brick manufacturer, Brickworks, has posted its highest adjusted net profit of $410 million in its half-yearly underlying earnings — up 24% on the same time last year.
In its release posted to the ASX this morning, Brickworks recorded sales of $584 million, a 13% increase compared to this time last financial year.
Brickworks is also increasing its dividend by 5% to 23 cents a share for the six months to January 31, maintaining its 47-year record of maintaining or increasing dividends.
"Despite increasing interest rates, we are continuing to experience strong demand for prime industrial property," Brickworks Managing Director Lindsay Partridge said.
"In response to the rising interest rates, we have taken a pro-active strategy to reduce hearing within our Property Trusts, by retaining some funds that may otherwise have been distributed.
"Sales have remained relatively robust across most businesses, despite a decline in new home sales."
But Mr Partridge said there is "no doubt that a slowdown in activity will arrive before the end of the calendar year, once the existing pipeline of work is built out".
"The impact of the slowdown is likely to be more significant for our Australian business, where exposure to detached housing is greatest," he said.
Federal Reserve 'prepared to use all our tools' in wake of SVB and Signature Bank collapse
By Kate Ainsworth
Federal Reserve Chairman Jerome Powell also used his post-rate rise press conference to discuss the collapse of SVB and Signature Bank, and the health of the banking system.
He was asked by a reporter how Americans can be confident that there aren't other weaknesses in the US banking system.
Here's what Powell had to say:
"So at a basic level, Silicon Valley bank management failed badly. They grew the bank very quickly. They exposed the bank to significant liquidity risk, and interest rate risk didn't hedge that risk," he said.
"We now know that supervisors saw these risks and intervened. We know that the public saw this. We know that SVB experienced an unprecedentedly rapid and massive bank run.
"So this is a very large group of connected depositors, concentrated group of connected depositors in a very, very fast run, faster than the historical record would suggest."
He also told reporters the Fed will do what it can to secure the banking system and prevent future collapses.
"Our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound," he said.
"In addition, we are committed to learning the lessons from this episode and to work to prevent … events like this from happening again.
Powell said he is focused on figuring out what happened with SVB and Signature Bank.
"My only interest is that we identify what went wrong here. How did this happen? Is the question. What went wrong? Try to find that," he said.
"We will find that and then make an assessment of what are the right policies to put in place so that it doesn't happen again and then implement those policies."
Is this the last time the Fed will raise interest rates?
By Kate Ainsworth
Long story short — don't count on it.
Speaking after the decision to lift rates again, Federal Reserve Chairman Jerome Powell said the central bank was on the verge of pausing further increases, but it depends on the broader economic outcomes from SVB and Signature Bank's collapse.
Here's some of what he told reporters earlier:
"It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond," Powell said.
"As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation.
"Instead, we now anticipate that some additional policy firming may be appropriate.
"We will closely monitor incoming data and carefully assess the actual and expected effects of tighter credit conditions on economic activity, the labor market and inflation."
It's worth pointing out that this is a noticeable shift in the central bank's strategy from just a fortnight ago, when Powell testified in Congress that hotter-than-expected inflation would likely force the Fed to keep lifting interest rates higher — and possibly faster — than expected.
What does the Fed's 'dovish' rate hike mean?
By Michael Janda
So, the US Federal Reserve did what was broadly expected and raised official interest rates by 0.25 of a percentage point early this morning to a 4.75-5 per cent range.
Economists generally described the move as "dovish" — that's the jargon for not very aggressive.
Basically, the Fed was previously thinking of raising rates by half a percentage point, until Silicon Valley Bank and a bunch of other regional US banks faced a mass withdrawal of deposits, causing a few to collapse while others teeter on the brink.
That banking crisis is what's triggered this more cautious approach.
Some thought the Fed might pause its interest rate rises altogether, but headline inflation in the US is still at 6 per cent and slow to come down, prompting the Fed to move again.
The big change though was in the central bank's language.
Last meeting it said, "ongoing increases in the target range will be appropriate."
This meeting it said, "some additional policy firming may be appropriate."
Obviously, "may" leaves open the space for no more rate hikes, and "policy firming" implies fewer rate hikes than "ongoing increases".
Unlike the Reserve Bank of Australia, the Fed publishes its committee members' future interest rate projections.
The latest "dot plot" implies one more rate hike to 5-5.25 per cent, with rate cuts next year to 4.25 per cent, rates falling further to just above 3 per cent in 2025 and settling at 2.5 per cent over the long term.
But many economists, such as Andrew Hunter from Capital Economics, expect rate cuts to arrive sooner.
"Even before the crisis most leading indicators suggested the economy was at high risk of recession this year and, with recent events likely to hit confidence and result in a significant further tightening in credit conditions, those risks have risen further," he wrote.
"With that economic weakness likely to accelerate the downward trend in core inflation, the upshot is that we still think that the Fed will be cutting rates again before the end of this year, sooner than officials' own projections imply."
And why do we care in Australia?
What the US does with interest rates has huge effects on international money flows and exchange rates.
If the Fed does indeed pause after this rate hike, or soon, then it will relieve one source of pressure on the RBA to keep hiking.
Fed says US banking system 'sound and resilient' but inflation remains 'elevated'
By Kate Ainsworth
Sticking with news from the Fed overnight — not only did their statement after increasing interest rates again give us a look at how the US economy is tracking, but it also gave us a little insight into how they see the recent tumultuous developments in the US banking system.
The Fed's statement says inflation in the US remains "elevated" and unemployment remains low, although "job gains have picked up in recent months and are running at a robust pace".
The central bank also says the country's banking system is "sound and resilient" but notes that the recent developments (that is, the SVB and Signature Bank collapses) are likely going to cause tighter credit conditions for households and businesses — but it's unclear just how much impact it will have on economic activity, hiring and inflation.
