Labour will form a government – possibly in its own right – despite receiving less than a third of the vote, but after a night of chaos the Coalition’s ranks were devastated by blue-green independents, the Opposition and the Greens.
Treasurer Josh Frydenberg is one of six Liberals who have been defeated or face defeat in the once blue-ribbon seat by climate 200-backed blue-green independents.
On Wall Street, stocks fell for seven straight weeks and now narrowly avoided a collision with a bear market, leaving prophets lost. While this episode may lack the pandemic punch, it more than makes up for it with plenty of cross-flow. First and foremost is the Federal Reserve, which is bent on squeezing excess money from the economy. Add to this the war, and supply chain and stock valuations have recently been at two-decade highs.
The result is a large variance in the predictions.After six other strategists cut year-end forecasts for S&The gap between the highest and lowest forecasts for the P 500 this month is 37%. At this time in the past decade, this huge divergence has only occurred once: right after the volatile March 2020 sell-off.
U.S. stocks retreated from session lows after U.S. stocks rebounded on Friday&The P 500 is 20% below its Jan. 3 record close. U.S. Treasuries and the dollar rose as safe-haven assets were bid.
The benchmark fell less than 1%, gaining bids in the last hour of trading. It fell more than 2% earlier, and a close at that level would meet the common definition of a bear market.
today’s agenda
Local: RBA Assistant Governor Christopher Kent speaks.
Overseas data: US Chicago Fed index; Eurozone Germany IFO business climate survey
Market Highlights
ASX futures fell 15 points or 0.2% to 7129
- AUD -0.1% to 70.40 US cents
- Bitcoin -2.4% to $29,242.00 at 11.14pm AEST
- Wall Street: Dow +0.1% S&P 500 flat Nasdaq -0.3%
- In New York: BHP +2.2% Rio +2.4% Atlassian +1.5%
- Tesla -6.4% Apple +0.2% Amazon +0.2%
- Europe: Stoke 50 +0.4% FTSE +1.2% DAX +0.7% CAC +0.2%
- Spot gold rose 0.2% to $1,846.50 an ounce
- Brent crude rose 0.5% to $112.55 a barrel
- U.S. oil rose 0.3% to $110.28 a barrel
- Iron ore rose 6.1% to 6.1% to $134.25 a tonne
- 2-Year Yield: US 2.58% Australia 2.45%
- 5-Year Yield: US 2.80% Australia 2.99%
- 10-Year Yield: US 2.78% Australia 3.31% Germany 0.94%
From Today’s Financial Review
Labour – Green Climate Showdown: Anthony Albanese will be sworn in as Australia’s 31st prime minister on Monday after the Liberal Party suffered a crushing defeat in a special election.
The blue-green wave will hit Labour and the Greens next: As working women seek socially progressive candidates, the blue-green wave that saw Scott Morrison oust is likely to spill over into the seats Labour and the Greens hold at the next election.
Climate voters herald irreversible change in politics: For the first time since 2010, the Coalition, which has weaponized climate change policy at every election, has found itself on the receiving end, with the most brutal consequences.
U.S.
Difficult to observe, unpredictable, and trading is a nightmare. But there is S&Has the P500’s slide so far been an unconditional panic? In some ways not, it could be bad for stocks in the short term, Bloomberg’s Katie Greifeld and Vildana Hajric wrote.
Even as the U.S. stock market benchmark fell 20% from record levels for the first time since March 2020, trading volumes have been fairly even and the CBOE Volatility Index is below this month’s highs.Meanwhile, the Cboe SKEW Index – Bearish S’s Implied Volatility&P 500 puts versus calls — near two-year lows.
A relative lack of anxiety is not necessarily a good thing from a contrarian perspective. that S&According to AlphaTrAI’s Max Gokhman, the P 500’s path remains relatively orderly, without any clear signs of panic that a bottom has yet to emerge. The Fed is looking to the past for tighter financial conditions, with a bleak outlook.
“Investors may hold their breath because there’s more to this dip before the roller coaster year starts to pick up,” said Gokhman, the firm’s chief investment officer. “With the Fed as the operator of rides, We shouldn’t expect a gentle slide back to the station. Only one-third of tightening cycles end without a recession, and they all start with inflation below 3.3%.”
Europe
Celebrities may join forces with private equity to launch a new shopping spree in the UK. That will revive the post-Brexit takeover spree in the second half of the year that culminated in the £9.8 billion ($12.2 billion) takeover of Wm Morrison Supermarkets last October.
Rising valuations finally ended last year’s dumpster dive in the UK. But shares in the already relatively cheap UK market fell sharply, leading to a pick-up in deal flow.
On Thursday, domestic repair company HomeServe agreed to be acquired by Brookfield Asset Management for £4.6bn, including net debt assumed. Shares of HomeServe tumbled, and despite a 71% premium, the offer fell short of its pre-bid one-year high.
A few days ago, KKR & Co. bought ContourGlobal for 4.9 billion pounds, offering shareholders slightly more than what the utility paid for in its 2017 initial public offering. Shares have traded below that level for the past four years. Founding shareholder Reservoir Capital Group, which still owns 71% of the business, applauded.
UK assets are now much cheaper for dollar-based funds. GBP/USD is down more than 10% since May 2021. The FTSE 250 index of mid-cap companies, whose constituents are sized for acquisitions, is down more than 25% in dollar terms from its September peak. That’s almost as much as the Nasdaq Composite has fallen from its recent highs.
Morgan Stanley analysts believe that the UK market has historically been very cheap. Last month, they looked at price-to-earnings multiples (adjusted for the economic cycle) for stocks traded since 1980: UK stocks are about 1% below average and US stocks 58% higher.
Asia
China’s near-trillion-dollar hedge fund industry could add to the volatility in its stock market, as deepening portfolio losses sparked forced selling by some managers.
Some 2,350 equity-linked hedge funds fell below a threshold last month that would normally trigger provisions that would require them to cut their exposure, according to an industry data provider, with many moving toward levels of forced liquidation. Such signs of stress are “near record highs,” analysts at China Merchants Securities said in a note this month.
“After the rapid expansion of the industry last year, market pressure may be considerable, especially if quantitative funds focus on reducing their holdings,” said Yan Hong, director of the China Hedge Fund Research Center, given their similar trading strategies. Shanghai Advanced Institute of Finance. While not usually a problem, the measures are “forcing many hedge funds to sell” in a “highly volatile market” this year, he said.
Despite a brief respite, China’s benchmark CSI 300 posted its worst January-April period since 2008. The index has fallen about 17% so far this year as strict Covid Zero policies and a crackdown on private companies have combined to dent investor confidence. A string of disappointing economic data from China this month also highlighted the growing toll from a reliance on lockdowns, raising concerns that unless China changes its approach, the market will remain under pressure.
Johann Rupert, chairman of Richemont Group, said demand in China will recover more slowly than expected, clouding the outlook for a market that has fueled near-term growth in the luxury sector.
In a conference call with reporters, the chairman said his “gut feeling” is that China’s economy will suffer from the effects of Covid-19 and the lockdown for longer than most people think, and that the country will rebound more slowly than others . Richemont Group owns luxury watch and jewelry maker Cartier.
“The country is going to take an economic hit,” said Rupert, who founded Richemont in 1988. “There’s going to be a temporary contraction.”
He said investors should not expect a triple-digit rebound in China that will be slower than the recent U.S. recovery. Large companies in China could lay off workers, affecting consumers’ purchasing power, he said.
currency
The ruble surged to its highest level in seven years against the euro. Ukraine’s central bank could resume normal monetary policy decisions as early as June. Germany’s finance minister said the G7 would agree to provide Ukraine with more than $19 billion in short-term financial aid.
commodity
Iron ore futures in Singapore were on track for their first weekly gain in five as China’s lower borrowing rates and reductions in steel raw material inventories boosted sentiment. Base metals also rose.
Singapore futures surged more than 6% after midday, their biggest one-day gain since mid-March. Chinese banks slashed key interest rates on long-term loans by a record on Friday, a move that will lower mortgage costs and could help deal with weak loan demand. Meanwhile, iron ore inventories at major Chinese ports fell for an eighth straight week, according to Mysteel data compiled by Bloomberg.
