There’s no Santa rally for the ASX this year as the ASX200 finished 229 points (2.76%) lower last week at 8,067. It seems the Fed's hawkish rate cut spooked equity markets during an illiquid time of the year.
The Materials sector declined by 4.83%, leading the weakest performers, followed by Consumer Discretionary (-3.44%), Financials (-3.36%) and Energy (-2.25%).
Conversely, Industrials (+0.69%) and Utilities (+0.50%) outperformed the broader market, while Consumer Staples (-1.0%) and Health Care (-1.01%) fared better than other sectors.
At the individual stock level, Silex Systems (-17.42%), Appen (-16.34%), Deep Yellow (-16.02%) and Bannerman Energy (-11.96%) recorded double-digit losses. Meanwhile, Cettire (+19.64%), Novonix (+6.61%), PointsBet Holdings (+6.25%) and Kogan (+5.64%) posted solid gains.
“In a holiday-shortened week, the highlight and the only feature on the local data calendar is the minutes from the RBA’s December meeting,” IG Markets analyst Tony Sycamore noted.
Meanwhile, US stocks rebounded on Friday, supported by cooler inflation data that eased concerns following the Federal Reserve’s hawkish stance on interest rates. However, for the week, the Nasdaq fell 2.25%, the S&P 500 declined 1.99% and the Dow Jones shed 987 points (-2.25%).
November's Consumer Price Index (CPI) and Producer Price Index (PPI) hinted at a favourable Personal Consumption Expenditures (PCE) inflation report, which came in softer than expected.
Core PCE inflation rose by just 0.1% month-on-month in November, down from 0.3% in October, while the annual rate remained at 2.8%, below the 2.9% forecast. Additionally, data from October and September saw slight downward revisions.
“Comments from Fed speakers on Friday night in the aftermath of the Thursday FOMC meeting had little impact on pricing,” Sycamore wrote.
“San Francisco Fed president Mary Daly expressed comfort with the median expectation of two rate cuts in 2025 and supported chair Powell’s stance that the Fed has entered a new phase of policymaking.
"Cleveland Fed president Hammack, who dissented, argued that the policy rate is near neutral, wanting more evidence of inflation returning to the Fed’s 2% target before further rate cuts.
“Over the weekend, the US Senate passed legislation to extend public funding and end a brief government shutdown after missing a midnight Saturday deadline.
"The new legislation extends government funding until March 14 and allocates $100 billion for disaster-hit states and $10 billion for farmers. It does not raise the debt ceiling, which President-elect Trump had urged Congress to address before his inauguration on January 20.”
“Looking ahead, the economic calendar is light in a holiday-shortened week, with the key events being CB Consumer Confidence and Durable Goods Orders. The rates market starts the week pricing in 44bp of Fed rate cuts for 2025, almost back to where it started last week before it collapsed to 31bp after Thursday's hawkish Fed rate cut.”
Europe lags
Europe's STOXX 600 logged its second consecutive weekly decline on Friday, weighed down by sharp losses in the healthcare sector after Novo Nordisk (NYSE:NVO) reported disappointing trial results for its next-generation obesity drug, CagriSema.
The pan-European STOXX 600 index closed 0.9% lower, trimming earlier losses of up to 2% during the session and ended the week nearly 2% down — its worst weekly performance since early September.
Novo Nordisk (NYSE:NVO) shares plunged 20.8%, wiping approximately $125 billion off the company’s market value after late-stage trial data for CagriSema fell short of expectations. The broader healthcare sub-index dropped 4%, while Denmark's OMXC20 benchmark fell 13.2%, its lowest close since August 2023.
Most STOXX sub-sectors posted losses, though real estate emerged as a rare outperformer with a 1.4% gain. Sentiment was further dampened by comments from US President-elect Donald Trump, who demanded the European Union (EU) increase purchases of US oil and gas to reduce its trade deficit with the United States or face tariffs. The European Commission responded by expressing willingness to strengthen ties with the US, particularly in the energy sector.
"Trump's deeply flawed understanding of trade balances and drivers is being applied once again and to a degree this kind of thing was expected by the EU and others," Scotiabank (TSX:BNS) analysts wrote in a note.
"Investors had already begun pricing in the potential risk, but the President-elect's comments today will have focused minds," noted Danni Hewson, head of financial analysis at AJ Bell.
In the UK, the FTSE 100 recorded a comparatively modest decline of 0.3%. British retail sales data for November showed a weaker-than-expected rise of 0.2%, highlighting sluggish economic momentum.
Currencies and commodities
Currencies
The US dollar eased against a basket of major currencies but remained on track for a third consecutive weekly gain.
The dollar index, which tracks the greenback against currencies including the euro and the yen, slipped 0.59% to 107.79.
The euro gained 0.64%, trading at $1.0428, while the dollar fell 0.69% against the Japanese yen to 156.35.
Commodities
Oil prices edged higher as the dollar retreated from two-year highs and as inflation data bolstered expectations of two Federal Reserve rate cuts in 2025.
- US crude rose 0.12% to $69.46 per barrel.
- Brent crude added 0.08%, settling at $72.94 per barrel.
Gold prices surged in response to the inflation report but appeared set for a weekly decline.
- Spot gold climbed 1.11% to $2,622.62 an ounce.
- US gold futures advanced 1.41% to $2,628.70 an ounce.
What about small caps?
As expected it has been a super quiet morning for small cap news.
The S&P/ASX Small Ordinaries finished Friday 0.91% to 3,039.30 and lost 3.02% for the week.
- Cyprium Metals Ltd (ASX:CYM, OTC:CYPMF) has confirmed that Flat Footed L.L.C. (FF) has received a no-objection notice from the Foreign Investment Review Board (FIRB) for its involvement in Tranche 2. The company completed Tranche 1 of a two-tranche placement, raising A$5.2 million before costs as part of its larger A$13.5 million capital-raising initiative. Tranche 2 is designed to raise an additional A$8.3 million and will involve the issue of 297,488,855 fully paid shares and 148,744,427 unlisted options.
- Prescient Therapeutics Ltd (ASX:PTX, OTC:PSTTF) has announced that the US Food and Drug Administration (FDA) has cleared the Investigational New Drug (IND) application for the Phase 2 trial of PTX-100. This first-in-class Ras pathway inhibitor will be tested on patients with relapsed and refractory cutaneous T-cell lymphomas (r/r CTCL). The IND approval allows Prescient to initiate the Phase 2 study, marking a key milestone in its development of innovative cancer therapies. Notably, PTX-100 holds Orphan Drug Designation from the FDA for all T-cell lymphomas.