Australia: Market falls after the Fed rate hikes

Australia stock market finished session lower on Thursday, 15 December 2022, amid concern that U.S. interest rates will remain higher for longer than expected after the Federal Reserve revised upward its rate outlook for the next year. However, market losses capped following the release of positive domestic unemployment data.

At closing bell, the benchmark S&P/ASX200 index was down 46.52 points, or 0.64%, to 7,204.78. The broader All Ordinaries index fell 48.40 points, or 0.65%, to 7,390.35.

Total 9 of 11 sectors were lower along with the S&P/ASX 200 Index. Consumer Staples was the best performing sector, gaining +0.73%, followed by energy (up 0.4%). Meanwhile, material was worst performing sector, declining 1.35%, followed by consumer discretionary (down 1.25%), A-REIT (down 1%), and healthcare (down 0.8%).

The top performing stocks in S&P/ASX200 index were BLACKMORES and NEW HOPE CORP, up 7.47% and 4.65% respectively. The bottom performing stocks in S&P/ASX200 index were PILBARA MINERALS and CORE LITHIUM, down 11.4% and 9.4% respectively.

Stocks met selling after the U.S. central bank raised its key short-term rate by 0.50 percentage points, as widely expected, marking its seventh hike this year, but also provided a hawkish message while expressing its determination to tame inflation, pointing to further hikes and keeping rates high for longer than earlier hoped.

The latest increase brings the Fed's federal funds rate to a range of 4.25% to 4.5%, its highest level in 15 years. Fed policymakers forecast that the cental bank's rate will reach a range of 5% to 5.25% by the end of 2023. That suggests the Fed is prepared to raise rates by an additional 0.75 percentage points next year. The Fed also signaled it expects its rate will come down by the end of 2024 to 4.1%, and drop to 3.1% at the end of 2025.

Investors' eyes will now be trained on policy decisions from the European Central Bank and Bank of England later in the global day, as officials there also stood ready to hike rates again against the rising risks of fomenting recessions.

Shares of materials declined, with copper mining company IGO declining by 4.3%, while Mineral Resources fell 4.7%. BHP slid by 0.8% and Rio Tinto dropped by 0.9%.

Shares of lithium companies performed poorly after Pilbara Minerals accepted a low bid for the metal (3% lower than mid-November prices) at its latest auction on the battery material exchange, which suggested spodumene prices had peaked. Pilbara Resources plummeted 11.4% and Allkem plunged 4.9%. Core Lithium tumbled by 9.4%, followed by battery companies Syrah Resources and Liontown Resources, which lost 6.8% and 7.9%, respectively.

ECONOMIC NEWS: Australia's unemployment rate came in at a seasonally adjusted 3.4 percent in November, the Australian Bureau of Statistics said on Thursday - unchanged from previous month. The Australian economy added 64,000 jobs last month, following the increase of 32,200 jobs in October. There were 34,200 full-time jobs added last month and 29,800 part-time jobs added. CURRENCY NEWS: The Australian dollar was stood at 0.6776 against greenback on Thursday, down by 1.26% from yesterday's close of 0.6863, after trading in the range of 0.6773-0.6870.

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