Retail sales point to recession fears: Goldman Sachs expects commodities to outperform
Stocks fell sharply Thursday after new data showed retail sales fell more than expected in November, raising fears that the Federal Reserve’s relentless interest rate hikes are tipping the economy into a recession.
The disappointing retail sales report suggested inflation is taking a toll on consumers. Retail sales fell 0.6 per cent in November, according to the Commerce Department. That was a bigger loss than the Dow Jones estimate of a 0.3 per cent decline.
The equity market’s reaction is now factoring in a recession, and rejecting the possibility of a soft landing
The Dow Jones Industrial Average fell 763.54 points, or 2.25 per cent,. The S&P 500 dropped 2.48 per cent bringing its decline for December to about 4.5 per cent. The Nasdaq Composite tumbled 3 per cent as the battered tech-heavy index stretched its 2022 losses to more than 31 per cent.
The sell-off was broad-based with only 14 stocks in the S&P 500 trading in positive territory.
Mega-cap tech stocks declined, with shares of Apple and Alphabet down more than 4 per cent, and shares of Microsoft and Amazon lower by more than 3 per cent.
Shares of Netflix fell more than 9 per cent following a Digiday report that said the streaming firm is offering to return money to advertisers after missing viewership targets. Bank shares also declined as fears of a recession increased. JPMorgan Chase and Bank of America each lost more than 2 per cent.
If Tesla shareholders were already worried that Elon Musk is too distracted by his work at Twitter, they now have more reason to be upset: Musk disclosed yesterday that he had sold another $3.6 billion worth of Tesla stock, possibly to prop up his embattled social network. Musk has now sold $23 billion worth of Tesla stock this year, much of it after he pledged in April to stop selling shares to finance his Twitter deal.
Across the sectors overnight the sell off was broad based – thematic wise worst performers included social media, SPACS and EV charger stocks.
In commodity news, Goldman Sachs expects commodities to provide returns of over 40 per cent in 2023 amid supply concerns. Goldman Sachs believes Commodities will be the best-performing asset class once again in 2023,. Goldman expects the first quarter may be bumpy due to economic weakness in the US and China, but scarcity of raw materials from oil to natural gas and metals will boost prices after that. Note that Goldman predicted a multi-year commodities supercycle in late 2020 and has stuck to that view even as energy prices dipped in recent months due to China's Covid restrictions and a global economic slowdown suppressing demand
Futures
The SPI futures are pointing to a 1.16 per cent fall.
Currency
One Australian dollar at 8:10 AM has weakened compared to the US dollar yesterday buying 66.99 US cents (Thu: 68.63 US cents).
Commodities
Iron ore futures are pointing to a 2.14 per cent gain. Iron ore is 3.1 per cent higher at US$113.15 tonne.
Gold lost 1.7 per cent. Silver dropped 3.5 per cent. Copper fell 2.7 per cent and oil lost 1.5 per cent.
Figures around the globe
Across the Atlantic, European markets closed lower. Paris fell 3.1 per cent, Frankfurt dropped 3.3 per cent and London’s FTSE closed 0.9 per cent lower.
In Asian markets, Tokyo’s Nikkei lost 0.4 per cent, Hong Kong’s Hang Seng fell 1.6 per cent and China’s Shanghai Composite closed 0.3 per cent lower.
Yesterday, the Australian sharemarket lost 0.6 per cent to close at 7205.
Dividends payable
ALS (ASX:ALQ)
Aristocrat Leisure (ASX:ALL)
Australian Vintage (ASX:AVG)
Elders Ltd (ASX:ELD)
EZZ Life Science Holdings (ASX:EZZ)
Technology One (ASX:TNE)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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