Market Update - 5th October 2024

Written by William Cooper

Domestic:

The ASX has finished relatively flat for the fortnight, with the big hitters of the ASX finishing slightly down to -0.05%, but the All-Ordinaries index, which measures ASX performance in its entirety, finished up 0.44%, reflecting stronger performance of small cap stocks. The materials sector recorded a 3-month high and their best week since October 2015, rocketing 9.3%, propelled by China’s aggressive stimulus push. Investors believe that China will reignite its, once inexhaustible, hunger for raw materials. As such, this saw iron ore miners such as Fortescue and BHP advance 13.62% and 12.38% respectively.

The U.S. Fed decided to lower rates for the first time since 2020, and this paved the way for a much-anticipated RBA announcement of the Australian cash rate on September 24th. However, to much dismay, the RBA held rates at the 4.35% determining that inflation remained above target and is proving persistent. Globally, despite interest rates going down across many major economies, Governor Michelle Bullock reiterated that Australia acts independently of its own domestic circumstances and does not largely consider other central banks policy decisions. The RBA has sustained its projections on bringing inflation back within the 2-3% range in late 2025.

International:

The global markets, similarly, to Australia, remained relatively flat for the most part, aside from a monstrous rally in the Asian markets with China and Hong Kong recording 21% rises in their local exchanges. These mark the largest weekly jumps since 2008 and 1998. These huge returns are driven by the huge monetary stimulus package announced by the People’s Bank of China (PBOC). The total size of the stimulus package is estimated to be around ¥7.5 trillion RMB ($1.5 trillion AUD), which equals roughly 6% of China’s GDP. Global economists are sceptical of the effectiveness of the package, but only time will tell. The Hang Seng Index closely followed the performance of its neighbouring sovereign state, seeing a near identical increase in price. However, these strong gains are not expected to stay, given the market became significantly overbought, which signals an imminent reversal is in order.