Markets at a glance 4 December

Around the grounds

The Australian share market is on the back foot on this Wednesday session, after scaling an all-time high yesterday, as financials and real estate stocks drag, while commodities, backed by strong underlying prices, helped to mitigate further falls.

To the detail. The real estate sector fell by as much as 2.7%, its worst intraday decline in four months, healthcare also took a hit while consumer staples slipped 0.6%.

As mentioned, commodities are helping cushion the blow as the heavily-weighted miners rise on the back of iron ore prices touching a two—month high on additional stimulus bets from China. Gold stocks are also tracking higher, while tech stocks have advanced.

On the data docket, the Australian economy grew less than expected in the third quarter as a government splurge on defence and infrastructure only barely offset softness in consumer and business spending. Data form the ABS showed GDP rose just 0.3% in the September quarter, missing forecasts of 0.4%. Annual growth also slowed to 0.8% from 1% the previous quarter, levels previously only seen during recessions. 

Breaking down the detail, household spending, which accounts for half of GDP, added nothing to growth in the period, leaving government spending to do all the heavy lifting. 

The Australian dollar slipped on the back of that release as a sluggish growth pace is likely to raise expectations of a less hawkish RBA stance and escalating global trade and tariff tensions are seen to cap any rally attempts for the local unit.

In the news

Quick check in on some of the stocks to watch in today’s trade.  Australian listed shares of Goodman Group (ASX: GMG) have tanked by more than 5% after a media report said China Investment Corporation (CIC) was selling nearly AU$2 billion worth of stocks in the property developer. The Australian reported the deal was handled by investment bank Citi though both Citi and Goodman Group declined to comment requested by Reuters, and CIC has yet to respond.

Elsewhere, Australian listed shares of Rio Tinto (ASX: RIO) are in focus after the miner confirmed it has formed a joint venture with Japan’s Sumitomo Metal to develop and operate the Winu Copper-gold project in Western Australia. Under the deal Rio will continue to develop and operate Winu, as managing partner, with Sumitomo slated to acquire a 30% equity share of the project for $399 million.  

Turning to the broker space and the houses have offered up a mixed view on Australia’s Collins Foods (ASX: CKF) after the company reported a 6.6% drop in half year underlying EBITDA yesterday, with margins impacted by flat same-store sales and inflationary pressures.

Morningstar says it expects the company to recover from the poor results, citing tax cuts, jobs growth and monetary easing, maintaining a fair value estimate of AU$13.50 per share.

Morgan Stanley meantime has raised their price target for the stock to AU$11.60 from AU$11, forecasting a stronger second half helped by improved division performance.

Macquarie though has bucked the trend cutting its price target on the stock by 1% to AU$8.20, flagging softer consumer sentiment and margin pressures.

Finally, Insurance Australia Group (ASX: IAG) shares are in focus as Jefferies remains upbeat on the stock after the firm highlighted focus on artificial intelligence (AI) in its annual investor briefing. The broker says the company’s investment in GenAI tech will “rapidly improve claims processing times”, upping the target for IAG to AU$8.35 from AU$7.85, with a ‘hold’ rating retained.

The stock is up over 50% YTD, as of last close.

Going global

Rounding things out on the global stage, it’s a whip-saw session for equities around the rest of the Asian region, with Tokyo’s Nikkei 225 erasing earlier gains to trade in the red at midday.

Meantime, focus remains fixed on South Korea after a surprise declaration of martial law yesterday sent the won plummeting and gave U.S. treasuries a brief safe-have boost before the move was lifted, removing one source of geopolitical jitters for global equity markets.  

The South Korean President Yook Suk Yeol reversed the declaration mere hours after imposing it, backing down in a standoff with parliament which rejected his attempt to ban political activity and censor the media. Calls now are for President Yoon, who has been in office since 2022, to resign or face impeachment.

Elsewhere, European shares touched a month high despite political turmoil in France, which has pushed the French government to the verge of collapsing. The country’s lawmakers are bracing for more turmoil as they vote on no-confidence motions which are all but certain to oust the coalition of Prime Minister Michel Barnier, deepening the political crisis in the euro zone’s second largest economy.

Finally, to the US and China has banned exports of some critical minerals used in semiconductors and infrared technology to the country, escalating trade tensions just days after Washington’s latest crackdown on China’s chip sector.

Staying stateside, U.S. central bankers said overnight they continue to believe inflation is heading toward their 2% target and signalled support for further interest rate cuts ahead but stopped short of giving any firm guidance on a December rate-cut. Markets are pricing in a near 70% chance of a 25-basis point cut from the federal reserve this month and see another two rate cuts by the endo f next year, a slower pace than Fed officials projected in September.

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