- Slight miss on Australian GDP expectations of 0.6% vs. the 0.7% forecast.
- Slumping Chinese exports, 8.7% lower than at this time last year.
- The US market sold off overnight and Chinese data out Wednesday morning is doing little to assuage some nervous investors. Oil and tech are feeling the brunt of the selling pressure.
Oil and tech feeling the brunt of a possible slowdown
Oil exploration and production company Beach Energy Ltd ASX:BPT (BPT) is lower by over 9% Wednesday as the broad-based oil sell-off gathers steam.
Trailing the markedly down international crude oil prices, BPT is pricing in a difficult few months ahead for the oil company.
The US’s largest oil company, Exxon Mobil Corporation NYSE:XOM (XOM), is down by nearly 10% post-Thanksgiving, reflecting the market uncertainty over energy demand in the new year.
Markets are still adjusting to the expectation-busting US services sector print on Monday evening. Pricing in additional rate hikes that manufacturing and European business conditions might have otherwise shed.
A tack-on of the market view of the rate-hike cycle sent the NASDAQ lower by 2% on Tuesday evening, and Australian tech is following suit. Wisetech Global Ltd ASX:WTC (WTC) down by 4%, Wednesday morning. Xero Ltd ASX:XRO (XRO) is trailing with a drop of 2.5%.
Top Australian Brokers
Gas, coal, and iron ore finding a bid
The natural gas focussed companies, Woodside Energy Group ASX:WDS (WDS) and Santos Limited ASX:STO (STO), are faring a little better. Down only marginally in morning trade Wednesday, with natural gas still fetching a high price in Europe and Asia.
Winter restocking in Europe and Japan, along with supply chain reorganisations, continue to boost the margins of gas companies.
Gas’s high prices and coal’s interchangeability for gas into the fuel mix of steam-turbine power generators are propping the price of coal. Iron ore is finding a decent bid as loose talk of restriction easing sends prices higher.
We’ve heard this talk of restriction relaxation before, so it should be taken with a pinch of salt. Nevertheless, BHP Billiton ASX:BHP (BHP) and Fortescue Metals Group ASX:FMG (FMG) are both ticking higher on the back of the iron ore price support.
The market is presently displaying a nervous disposition, inferring and implying obstacles to growth that are not necessarily present.
A strong data print here or there and selling pressure is applied under the supposition that the big bad Fed will come down harder on inflation.
In market conditions such as these, opportunities will present themselves to the value investor, provided the analysis is conducted to exacting standards.
In such a market, volatility will remain elevated for some time. The international focus remains on the Fed’s reaction to inflation; on top of this, Australia must balance the heavy hand of the Chinese COVID-19 policies.
The rest of the week
Markets will attempt to wind down in volumes before entering the holiday period and closing out the year. Investor concerns over China and the Fed, combined with lighter trading volumes, may give a few investors some restless nights before Christmas.