The Australian share market has followed Wall Street higher as the US central bank announced a smaller interest rate increase, thanks to cooling inflation.
And the Reserve Bank of Australia will replace the portrait of the late Queen Elizabeth II with a new design that honours the culture and history of Indigenous Australians.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Markets snapshot at 4:25pm AEDT
By Sue Lannin
- Australian dollar: 71.46 US cents (up 0.1%)
- ASX 200: 7,511 (up 0.1%)
- All Ordinaries: 7,729 (up 0.2%)
- Nikkei 225: 27,435 (up 0.3%)
- Shanghai Composite: 3,289 (up 0.1%)
- Hang Seng: 22,149 (up 0.4%)
- NZ50: 12,152 (up 0.5%)
- Dow Jones: 34,093 (steady)
- S&P 500: 4,119 (up 1%)
- Nasdaq Composite: 11,816 (up 2%)
- FTSE: 7,761 (down 0.14%)
- Brent crude: $US83.59 a barrel (up 0.9%)
- Spot gold $1953.58 an ounce (up 0.15%)
- Iron ore: $US125.65 (down 1.2%)
- Bitcoin: $US23,879 (up 0.8%)
That's all folks!
By Sue Lannin
Thanks for joining me today with the big news being the expected 0.25 per cent interest rate rise from the US central bank.
Overnight, we heard from Fed chair Jerome Powell, who said while inflation had softened (disinflation), there was still more work to be done, and rates could rise to 5 per cent.
Markets chose to focus on the possibility of the Fed pausing its monetary policy tightening cycle.
The Commonwealth Bank sees the Federal Reserve making one final rate hike of 0.25 per cent next month to a peak of 4.75 per cent to 5 per cent.
And the CBA thinks the Reserve Bank could raise official rates here by as much as 0.4 per cent next week.
That's despite retail sales and jobs going backwards in December.
But it reckons there is a 65 per cent chance of a 0.25 per cent lift in rates to 3.35 per cent.
Meanwhile, the International Monetary Fund says Australia needs to swallow some bitter medicine to reduce its budget deficit and avoid a recession.
I'll leave you with this wrap from my colleague Peter Ryan.
ASX top movers
By Sue Lannin
The Australian market reached yet another nine month high today before slipping back.
7 out of 11 sectors on the ASX 200 gained led by industrial firms, with tech stocks and consumer companies also performing well.
Energy stocks, miners and banks weighed on the market.
Top performer on the ASX 200 was data centres firm Megaport (+11 per cent), while insurer QBE (-4.8 per cent) lost the most.
Here are the top movers on the ASX 200:
ASX makes gains as Fed delivers smaller rate rise
By Sue Lannin
The Australian market has followed Wall Street higher as the US central bank reduce the size of its rate rises because of falling inflation.
The ASX 200 index came off its earlier highs to end up by 0.1 per cent, while the All Ordinaries rose by 0.24 per cent.
Most sectors rose led by industrials, education firms, consumer stocks, technology and real estate.
IG Market's Tony Sycamore says the ASX 200 reached a fresh 9 month high "before sellers again emerged to take the shine off early gains."
"The persistent selling in the local market is likely a large institutional player getting out of the Australian market in favour of global stock markets with a higher percentage of growth stocks than our value-laden index. "
"Growth stocks are better positioned to benefit from an imminent Fed pause."
"Or possibly on concerns the RBA still has a lot more work to do to break the back of stubborn inflation and speculation increases of a larger-than-expected RBA rate hike next week."
Big miners, big banks and energy firms weighed on the market.
Oil and gas stocks fell after oil prices plunged 3 per cent overnight after a rise in US stockpiles.
The big banks were mainly lower with the Commonwealth Bank dropping by 0.4 per cent after hitting a record high above $110 a share yesterday.
The big miners, BHP, Rio Tinto, and Fortescue Metals, lost ground after iron ore prices fell in China.
Rio fell more, even though that deadly radioactive capsule it lost (unbelievable I know. You had one job, Rio), was found in the Western Australian outback.
Rio Tinto iron ore boss Simon Trott says the big miner will pay the state of the cost of search if requested. (yes Rio, you definitely should pay the cost of the search).
Here's more on Rio's own goal from my colleagues in WA.
Mangroves and saltmarsh protects 150,000 homes from storms
By Sue Lannin
What is the economic value of our environmental assets.
On #World Wetlands Day, the Bureau of Statistics says mangroves and salt marsh protected 280,000 people in 150,000 homes from potential storm damage in 2021.
That's a lot of natural protection and given the devastating flood damage we have seen across Australia over the past few years, it shows why protecting our environment protects us.
Saltmarsh also stores carbon, so can help reduce carbon emissions.
Australia's saltmarsh ecosystems are mainly in Queensland and the Northern Territory.
More than one third of the world's wetlands have disappeared over the last 50 years.
The numbers are part of the bureau's experimental National Ocean Account.
For more on why we should give the environment an economic value, here's this must read story from my colleague Gareth Hutchens.
NAB tips 19 per cent fall in property prices
By Sue Lannin
National Australia Bank says its residential property index fell for the third quarter in a row in the December quarter as the downturn in national home prices deepened.
The index closed the year at a 2 year low of 5 points, down from 58 points at the start of 2022.
While home prices are declining, rents continue to rise with NAB seeing strong growth in rental markets.
Property professionals surveyed for the report expect rental growth rates to remain relatively high over the next 1 to 2 years, with rents expected to rise in all states and territories except ACT.
NAB expects more home price declines as interest rate keep rising, and is sticking to its prediction that property prices could fall by 19 per cent peak to trough.
"Our view is that the housing market will continue to adjust to higher interest rates as 2023 progresses with prices declining by another 11 per cent this year across the capitals after falling by 7 per cent over 2022."
"Overall, that equates to a peak to trough decline of 19% following the peak in prices mid last year. "
"We still see the declines as orderly, primarily reflecting reduced borrowing power and affordability constraints rather than an oversupply of housing."
"Indeed, the rebound in population growth alongside a healthy labour market and very tight rental markets are all offsetting factors at present."
"We continue to see the RBA lifting rates at each of the next two meetings, before pausing at 3.6 per cent through the rest of 2023 with some easing in rates likely in 2024."
Apartments drive rise in building approvals
By Sue Lannin
Approvals to build new homes increased in December, after a fall in November.
The Bureau of Statistics says dwelling approvals rose 18.5 per cent over the month on a seasonally adjusted basis, thanks to a surge in apartment construction.
Building permits were issued for 16,556 homes, with approvals for apartments surging by more than half over the month.
ABS head of construction statistics Daniel Rossi says the increase followed an 8.8 per cent decrease in November.
"The increase in the total number of dwellings approved in December was led by a sharp rise in approvals for private sector dwellings."
"The result was driven by a number of large apartment developments approved in New South Wales and Victoria."
Approvals to build new houses continued to fall.
And dwelling approvals fell 3.8 per cent from a year ago.
AMP Australia senior economist Diana Mousina says permits for houses and units have been trending down over the past year, and December's data was skewed by the large apartment developments in NSW and Victoria.
"The near-term trend for building approvals is still likely to be down because: housing demand was brought forward in 2020/21 as households made use of low interest rates, high household savings and the HomeBuilder (government) subsidy, and impacts of the RBA rate rises (worth 300 basis points) over 2022 are still yet to fully impact consumers and the housing market," Ms Mousina said in a note.
"However, any downside to approvals is also limited because house approvals have already declined a lot since early 2021 and there has been a pickup in net permanent migration which will continue to normalise in 2023, especially as China resumes international travel which will lift education arrivals."
However, Ms Mousina does expect the weakness in building approvals to translate into weaker residential construction, and detract from gross domestic product over 2023.
ASX holds onto gains at midday after Fed slows rate hikes
By Sue Lannin
The Australian share market is holding up after Wall Street rallied as the Federal Reserve raised official rates by a smaller amount.
The Fed raised the federal funds rate to 0.25 per cent to 4.5 per cent to 4.75 per cent, as expected.
At midday, the ASX 200 index was up 0.6 per cent, with most sectors higher led by education firms, industrials, technology, and consumer stocks.
Oil and gas stocks and miners are weighing on the market.
Oil prices plunged nearly 3 per as US fuel supplies rose the highest since June 2021, and major oil producers OPEC kept production targets unchanged.
Debt collector and payday lender firm Credit Corp (+9 per cent) is doing the best, despite after tax profit for the first half falling by 30 per cent to $31.8 million partly because of cover for loan losses and marketing costs and higher costs in the US.
But the credit company says consumer loans increased by one third and it expects record consumer lending for the 2023 financial year with earnings expected to recover strongly.
Credit Corp says the boost in consumer lending was driven by strong demand for its Wallet Wizard unsecured short-term cash loans.
"Strong consumer demand produced record gross lending of $201 million during the half-year," the company told the ASX.
Toll road operator Atlas Arteria (+0.6 per cent) climbed after France approved toll increases of nearly 5 per cent.
Atlas owns one third of the APPR motorway network in eastern France.
Investment firm Pinnacle Investment Management (-4.6 per cent) dropped after it saw a fall in half year earnings.
Gold stocks were among the best performers with Newcrest Mining (+4.6 per cent) and Northern Star (+5.1 per cent) making strong gains.
First Nations to replace Queen Elizabeth on $5 banknote
By Sue Lannin
The Reserve Bank will replace Queen Elizabeth II on the $5 banknote with a design that pays tribute to Indigenous Australians.
Britain's longest reigning monarch died in September last year and was succeeded by her son, King Charles III.
The decision by the RBA board to replace Queen Elizabeth with an Indigenous design, instead of King Charles, follows consultation with the Federal Government, which supports the change.
Federal Treasurer Jim Chalmers says the new design will reflect "our history, our heritage and our country."
First Nations people will be consulted on the design of the new $5 note.
The RBA says it will take a number of years for the new banknote to be designed and printed, so the current banknote will be used in the meantime.
"The Reserve Bank has decided to update the $5 banknote to feature a new design that honours the culture and history of the First Australians," the RBA said.
"This new design will replace the portrait of Her Majesty Queen Elizabeth II."
" The other side of the $5 banknote will continue to feature the Australian Parliament."
In the UK, the first coins bearing the image of King Charles were released in December.
Here's more on the decision to ditch King Charles from ABC political reporter Stephanie Borys.
ASX rises as Fed announces smaller rate hike
By Sue Lannin
The Australian share market has opened higher after the US central bank opted for a smaller size lift in official US interest rates.
Investors are hoping that cooling inflation in the US will lead the US central bank to pause its string of increases in borrowing costs, and also give the Reserve Bank food for thought.
The ASX 200 is up 0.5 per cent in early trade with most sectors higher led by industrials, property firms, consumer stocks and tech companies.
Energy stocks and miners are taking a hit after a fall in the price of oil and iron ore.
The RBA meets for the first time this year and is expected to raise borrowing costs by 0.25 percentage points.
WFH forever? Office vacancy rates rise
By Daniel Ziffer
Empty chairs in the office? Empty office next door?
Yep, the likelihood has increased.
Jumping in with new data about office vacancy rates from the Property Council of Australia. Over the six months to January the overall office vacancy rate has increased from 12.9 per cent to 13.3 per cent.
The vacancy rate in central business districts (CBDs) increased to 12.5 per cent, while the non-CBD rate fell a touch to 15.1 per cent.
St Kilda Road, Parramatta struggling
Office areas outside the CBDs are feeling the pinch the most, as companies used COVID to change their property 'footprint'.
More than 20 per cent of the offices Melbourne's St Kilda Road avenue of properties are empty. In Sydney, the areas of Crows Nest and St Leonards, north of North Sydney are struggling too.
It points to what's been a solidifying of the work-from-home trend necessitated by the onset of the COVID pandemic, leading to changes in the mix of retail, offices and residences in our nation's CBDs.
Adani abandons $US2.5 billion share sale
By Sue Lannin
Indian conglomerate Adani Enterprises has abandoned its $US2.5 billion share sale after a share price rout sparked by claims of fraud by a US hedge fund.
Last week's report by short seller Hindenburg Research accused Adani of share price manipulation, fraud, and the improper use of offshore tax havens.
Adani chairman Gautam Adani has seen billions of dollars wiped from his personal fortune since the report was released.
But he still has an estimated net worth of $US75 billion at 15th on the Forbes rich list.
And seven publicly listed Adani companies have lost $US86 billion in value over the past week.
Mr Adani called off the share sale yesterday, a day after it closed, as Adani Enterprise's shares, Adani's holding company, plummeted by 28 per cent.
"Today the market has been unprecedented and our stock price has fluctuated over the course of the day," Mr Adani said.
"Given these extraordinary circumstances, the company's board felt that going ahead with the issue will not be morally correct."
Mr Adani also brushed off Hindenburg's concerns about his companies high levels of debt and the valuations of seven listed Adani companies.
"Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt."
"This decision will not have any impact on our existing operations and future plans."
"Once the market stabilises, we will review our capital market strategy."
Adani has denied Hindenburg's allegations and threatened to sue the US firm.
It says it plans to hire a major global accounting firm to assess its corporate governance and audit practices.
Hindenburg disclosed that it holds short positions in Adani companies through US traded bonds and non-Indian traded derivatives.
It describes itself on its Twitter feed as:
"Popping bubbles as we see them."
"We express strong opinions. Not investment advice."
Keystone investors who supported Adani's share sale include Maybank Securities and the Abu Dhabi Investment Authority.
Adani said it would return the proceeds of the share sale.
Edward Moya, senior market analyst at stockbroker OANDA, said the cancellation of the share sale was troubling.
"The pain hitting Adani companies was crippling, so the news that the share sale is called is troubling, as this was supposed to show the company is still believed in by its high net-worth investors," Mr Moya said.
"To go through this exercise of a share sale and to call it off raises more questions."
Reuters
IMF urges tax reforms to fund budget
By Sue Lannin
The International Monetary Fund says Australia should wind back tax breaks on the family home, raising and expanding the goods and services tax, review the stage 3 tax cuts, and consider means testing the National Disability Insurance Scheme.
The IMF targeted an overhaul of tax and spending programs in its annual country review of Australia.
It says the Australian economy has a "narrow path" to avoid recession.
Here's my business colleague Peter Ryan on the AM program:
US stocks rise as Fed chief says inflation starting to ease
By Sue Lannin
The S&P 500 and the Nasdaq Composite rallied to close higher after Fed chairman Jerome Powell told reporters that inflation was starting to ease.
The Fed announced a smaller rate rise of 0.25 per cent because of cooling inflation.
It was a volatile session with the market falling further after the decision was announced, before rising as Mr Powell held his press conference.
Technology stocks, consumer firms, industrials, property stocks and miners drove the market.
The S&P 500 rose nearly 1 per cent, while the Nasdaq jumped nearly 2 per cent after a volatile trading session.
The Dow Jones index ended flat.
Sam Stovall, chief investment strategist at CFRA in New York, said markets were taking a glass half full approach to comments from Federal Reserve chair Jerome Powell.
"The market's reaction implies investors feel we are much closer to the end than we are, let's say, to the middle of the rate tightening cycle," he said.
"You certainly need disinflation in order to get down to your inflationary target and even though he (Jerome Powell) did say multiple times that we are not yet at a sufficiently restrictive policy stance to bring inflation back down to 2 per cent, the other statements implied that we are getting pretty close."
Economic data out showed that job openings in the US unexpectedly rose in December to 11 million, signalling that demand for labour remains strong.
The Australian dollar has surged 1.1 per cent to around 71.33 US cents after the greenback tumble, as Mr Powell said policymakers had spent alot of time talking about the path ahead.
More on the Fed's rate rise
By Sue Lannin
The US central bank has raised interest rates as expected, but has again eased back on the pace of increases with a 0.25 per cent hike, down from a 0.5 per cent rise in December.
It's the eighth lift in official borrowing costs since March last year, with US rates increasing by 4.5 per cent over the past year from near zero.
Federal Reserve chairman Jerome Powell told reporters at a press conference that the steep rate rises over the past year have been working, but there was more work to do.
"We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time," Mr Powell said.
"The US economy slowed last year, with real GDP rising at a below-trend pace of 1 per cent."
"Recent indicators point to modest growth of spending and production this quarter."
"Consumer spending appears to be expanding at a subdued pace, in part reflecting tighter financial conditions over the past year."
"Activity by the housing sector continues to weaken, largely reflecting higher mortgage rates."
"Higher interest rates and slower output growth also appear to be weighing on business fixed investment."
While inflation has been rapidly cooling in the US from a 40 year high above 9 per cent last year, Mr Powell says the Fed doesn't see it as a time to pause rate hikes and thinks borrowing costs could rise to 5 per cent.
"We've raised rates 4.5 percentage points, and we're talking about a couple of more rate hikes to get to that level we think is appropriately restrictive."
"And why we think that's probably necessary, we think because inflation is still running very hot."
"I don't see us cutting rates this year."
Here is the Fed's statement:
Fed raises rates by 0.25 per cent
By Sue Lannin
Good morning, welcome to the ABC's Markets blog. I'm Sue Lannin.
The big news everyone has been been waiting for is the US central bank has raised interest rates overnight by 0.25 per cent, and says it expects "ongoing increases" in rates to battle inflation.
Despite the pull back in the size of previous rate hikes, US stocks hit their lows after the decision, which saw the US official interest rate, the federal funds rate, increase to a range of 4.5 per cent to 4.75 per cent.
But shares rebounded during Federal Reserve chairman Jerome Powell's press conference.
The S&P 500 is up 1 per cent, while the Nasdaq Composite jumped nearly 2 per cent.
