• The ASX extended last week’s losses on Monday
  • Gas stocks fell after a decision by the Australian Federal Government
  • Gold miners also tumbled

 

The ASX extended last week’s losses, finishing Monday 0.5% lower as investors look for signs the Fed will pivot to a lower rate hike this week.

The Fed will hand down its rates decision on Wednesday (US time), with Jerome Powell’s comments to follow afterwards.

Investors expect that a less aggressive hike of 50bp (as opposed to 75bp) could steer the US economy to a soft landing.

“Over time, the US stock market has never bottomed before an associated recession has even begun, so we regard recent equity upside as a bear market rally,” says David Bailin, Chief Investment Officer and Head of Citi Global Wealth Investments.

Bailin says that a year like 2022 can make holding excess cash seem tempting, but the clear lesson of history is that this always leads to missing opportunities when markets begin to recover.

“For 2023, we reiterate the fundamental wisdom of keeping portfolios fully invested, anticipating the opportunities that we expect,” Bailin said.

ASX oil producers gained on Monday on the back of higher crude prices. This follows a threat from Russian President Putin, who reiterated that he could simply cut Russia’s oil production in response to the G7 price cap.

“I have already said that we simply will not sell to those countries that make such decisions. We will consider a possible reduction in production if necessary,” Putin said.

Gas stocks like Origin Energy (AS:ORG) fell almost 7% following the government’s proposed intervention in the gas market.

The Australian federal government has decided that it is stepping in to control the price of domestic gas to help users cope with soaring prices.

A temporary price cap will be placed on gas and coal, with the 12-month gas price cap set at $12 per gigajoule on new wholesale gas sales by producers in the East Coast.

Gold miners also tumbled after the spot gold price slipped half a percent to US$1,788.50 an ounce.

Experts believe the US CPI report due out tomorrow (US time) will determine gold’s price trajectory over the short term.

“If CPI runs hot, you might see a strong case for the Fed to deliver back-to-back half point rate increases before they pause, which might suggest gold might give back some of the gains its made over the past month,” says OANDA analyst, Edward Moya.

Meanwhile, China is reportedly considering a partial reopening of the Hong Kong border by January, which includes a non-quarantine period for travelelrs between the island and mainland.

This follows comments from the country’s top doctor who said that the fatality rate from the omicron variant of the virus is in line with influenza, or a 0.1% death rate.

 

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Casino operator Star Entertainment (ASX:SRG) resumed from a trading halt. On Friday, Star was fined $100m by the Queensland regulators, but has been allowed to keep its Brisbane and Gold Coast operations open under a strict special supervision.

 

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Nanosonics (ASX:NAN) fell 12% on no specific announcement.

AUB Group (ASX:AUB) was down 2.5% despite releasing an upbeat guidance. AUB said that it anticipates $41.5m – $44.5m NPAT in the first half of FY23 – which is 35.5% – 45.3% higher than for H1 FY22.

Rio Tinto (ASX:RIO) fell 1% after Turquoise Hill Resources shareholders approved Rio’s proposed acquisition of the ~49% of balance of Turquoise Hill under a plan of arrangement in Canada.

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