ASX gains as interest rate sensitive sectors bounce, US regulator approves Bitcoin ETFs

The ASX 200 has closed 0.5% higher today with the All Ords up the same.

You've got miners and some consumer companies leading the pack, with the little stock that could, Core Lithium, up again too today after it dived last week on news it has stopped production at its mine in Darwin.

Nine of 11 sectors ended higher. IT was the best performing sector, gaining +1.20% and +0.86% for the past five days.

See you all tomorrow!

This great piece from my colleague Kate Ainsworth has just been published about the fake sales crisis at online retailer The Iconic.

As Kate explains, the reason why fraudsters have been able to make purchases in the breached accounts of Iconic customers, is because the retailer lets customers store credit card details.

When returning customers make a purchase in their account, they are not required to pass extra barriers to purchase, such as entering security codes (CCV).

That makes it easier for customers to buy, but easier for fraudsters to buy as well, when they hack an account, explains cybersecurity expert Professor Richard Buckland.

"Anything that allows you to easily buy something with as few clicks and steps as possible, unfortunately, also makes you more vulnerable to being scammed or have your data stolen," he says.

"Because it makes it easier for the bad guy to buy something, too."

More here.

Just previewing what I'll be talking about on the 7PM Finance report tonight, the astonishing rise in Japan's stock market (and economy).

Japan's Nikkei index share average reached its highest since February 1990, after a year that saw it lift more than 30% (!).

What's done it? Well cheap money and low interest rates.

But we've had those too. It seems like long, boring structural changes have finally worked. Among them:

• Strengthening the ability of shareholders to advocate
• Pushing for more diversity on boards
• Helping workers switch jobs (for higher wages) and pushing for bigger pay packets

Just to clarify, and the SEC chair was very specific on this, that the 11 products being approved were solely spot Bitcoin ETFs.

The SEC remains extremely sceptical of cryptocurrencies, including bitcoin, as illustrated by the chair's clear warnings to investors.

"Bitcoin is primarily a speculative, volatile asset that's also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing," Gary Gensler cautioned.

"While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.

"Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto."

He really couldn't get much clearer than that. Basically the SEC felt it had little choice but to approve these products in light of that recent legal decision, but it certainly isn't enthusiastic about them.

Some home grown flavour in Citi's Asia-Pacific year ahead conference being held today, with its chief economist for Australia Josh Williamson chairing the session on monetary policy.

He's got a distinctly non-consensus, but not entirely unique, view that the Reserve Bank will hike interest rates once more in February to 4.6% before it finishes the current cycle.

Partly he believes that's because Australia, and the RBA in particular, has been a "laggard" in the global inflation and rates cycle.

"I like to think that we're probably six to nine months behind the US in terms of our macroeconomic cycle," he told the conference.

However, he also believes some unique local factors, such as around $280 billion in household savings accumulated during COVID, are slowing Australia's decline in inflation.

"In our view, domestic demand is ahead of where the economy's productive capacity actually lies," Williamson continued.

"The other thing too, is we still have a huge migration growth in Australia as well, which is adding hugely to domestic demand here, and certainly stretching it above where it is about the capacity of the economy to supply goods and services."

However, he doesn't rule out the strong possibility of the RBA leaving rates on hold, even if he thinks the better economic decision would be to raise them.

"I probably would suggest that the political risks around the RBA are that it's actually done," he said.

"We've commentated and published on the point that we do view that there has been more politicisation of the monetary policy process in Australia, certainly in the last six months, than there's been in the last sort of 60 years, I would say."

The Amazon rainforest is often described as the "lungs of the earth", a huge expanse of trees that store and absorb carbon dioxide.

Utterly enormous - it would cover 3/4 of the Australian mainland - it is mainly in Brazil.

Deforestation has been a substantial issue, but pledges at global meetings like COP and a development in Brazil's parliament may change that.

A bill regulating Brazil's carbon credit market has passed the lower house and could generate an estimated US$120 billion by 2030, tipping the financial scales and making it more profitable to keep and conserve the forest than to harvest and farm on it.

JP Morgan research lays out what this could mean:

"In the COP-26 that took place in Scotland in 2021, Brazil committed to reduce carbon emissions by 50% and methane emissions by 30% by 2030. The carbon credit market is a tool in the effort to achieve this goal. Also, a regulated market could unleash the Brazil protagonism (support) in terms of carbon credits, considering the country’s capacity top generate a high credit supply, even though Brazil is the 5th largest greenhouse gas emitter globally."

The project creates a “Brazilian Greenhouse Gas Emission Trading System” (SBCE).

Australia is working out there is money in high-quality carbon reduction programs, although the process to get there has been... very difficult.

Hi team, jumping in with an interesting report on the job market from ANZ economist Blair Chapman.

Plenty of people had time off over summer - good on you! - and many more are back at it for 2024, probably moving shortly into the post-holiday period of assessing whether your precise current position is what you want to be toiling at this time next year

Let's breakdown some of the key assessments.

Mr Chapman suggests we'll see things cool - which puts bosses in a better position than workers. Having a bet each way he says:

"The labour market is likely to continue slowing over 2024 with several indicators suggesting labour market strength peaked in late 2022 or early 2023. However, job vacancies remain elevated compared to pre-COVID levels across all states and territories suggesting there is scope for employment growth across the country in 2024, albeit at a slower pace than last year".

Why? Well population growth is expected to slow from its "current fast pace" over 2024 but it will remain faster than employment growth, meaning the unemployment rate will likely increase over the year.

Demand in aged care, accommodation, food and retail trade industries "suggests part-time jobs growth will be stronger than full-time".

Some interesting facts:

• New South Wales had the lowest unemployment rate
• Queensland had the fastest growth in hours worked
• Western Australia continued to have the highest participation rate of the states
• The Australian Capital Territory had its unemployment rate increase the most of all states and territories in Australia
  

Some more thoughts on that ETF decision in the US, from Dr Darcy Allen at the RMIT Blockchain Innovation Hub.

“The approval represents the long-awaited integration of the largest crypto asset into the US traditional financial system," he told ABC News.

“This is a landmark event in the mainstream acceptance of crypto."

As Dr Darcy explains, the ETF decision will make it easier for mainstream investors to get into cryptocurrency investment.

“Similar to a share on a stock exchange, bitcoin ETFs enable investors to get exposure to the Bitcoin price through traditional regulated stock exchanges, just like they would buy a share in a company," he says.

“For too long it has been prohibitively hard for institutional investors such as super funds to invest crypto assets. Bitcoin ETFs not only provide easier access for investors, but also enhance the perceived legitimacy of crypto.”

“The SEC announcement follows years of regulatory chaos and rumours of approval in the US. A Bitcoin ETF radically reduces the barriers to traditional financial investors to deploy capital into crypto.”

And importantly:

“I anticipate that Australia and many other jurisdictions to follow and approve ETFs this year," he says.

 You'll have read Michael's story earlier this day about that historic decision in the US to approve 11 applications for exchange traded funds (ETFs) tied to the most recognisable cryptocurrency, Bitcoin.

Put simply, this will allow ordinary investors (and also the uber rich) to invest money into funds that have bought up Bitcoin and are holding it in custodians, like Coinbase.

That would be rather than investors directly buying pieces of crypto coins through so-called wallets, which are still usually hosted by financial companies.

One of the 11 approved for an ETF is the world's largest asset manager Blackrock. Even talk that Blackrock had applied for a crypto ETF last year was enough to rally the market.

The decision to grant these ETFs is clearly a historic moment for cryptocurrency. The Crypto Council for Innovation, for instance, says it'll promote regulatory evolution and legitimacy.

"The introduction of a spot Bitcoin ETF isn’t just about market dynamics, it's a catalyst for regulatory evolution," they said.

"It necessitates a framework that accommodates the unique nature of crypto, potentially leading to more appropriate and informed regulatory policies in the crypto space.

"This milestone will shift public perception, painting Bitcoin as a legitimate component of a diversified investment portfolio."

Yet even the regulator that's done this, after some legal challenges, was wary to emphasise that this is not an endorsement.

"It should in no way signal the Commission's willingness to approve listing standards for crypto asset securities," SEC chair Gary Gensler warned.

The approvals come after years of instability in crypto, including the huge FTX case where many lost milions or even billions.

So, understandably, some are wary.

Take this statement by Better Way, a non-profit advocacy group founded in the US after the 2008 financial crash.

 They didn't go easy, describing crypto generally as a "worthless, volatile, and fraud-filled financial product".

“(This approval) will be interpreted and spun as a de facto SEC – if not US government – endorsement of crypto generally."

So what is your take?

I've been listening in to global banking giant Citi's Year Ahead Conference Asia-Pacific session, and wanted to share some thoughts from the Q&A session with Professor Keyu Jin from the London School of Economics.

She is a leading expert on the Chinese economy, having recently published The New China Playbook: Beyond Socialism and Capitalism, which was selected to be a Financial Times must read of 2023.

Professor Jin is worried about consumer prices falling in China.

"I'm worried about deflation. I think China really can do with a healthy dose of inflation, unlike other places in the world, that will force consumers to spend and and stop this wait and see cycle and also help mitigate some of these debt problems," she said.

"How to engineer a bit of inflation would be very interesting, but I think deflation is a real threat."

However, she isn't so worried about Chinese home prices falling sharply.

"I think it's under control," she said.

"It's not really going to be a freefall … it's not a free market so prices are not going to fall dramatically."

But while she doesn't see a sudden crash looming, Professor Jin also doesn't have a positive outlook for Chinese property prices.

"Let it kind of deflate slowly over time," she said of the government's approach.

"It will be a long run painful adjustment to a new equilibrium."

Good afternoon, Emilia here with you for the rest of the day.

I spent the day at the bustling Preston market in Melbourne's north yesterday while covering the November CPI release.

There, I found lots of traders battling with the dilemma of rising prices from their suppliers, but consumers with less cash to spend on more expensive produce.

Take the lovely butcher Frank that I met. He says (as was indicated in the CPI figures) that prices on lamb and beef did come down in 2023.

But just after Christmas, they have been rising by a few dollars again, as the wet weather impacts production.

"Beef and pork are steady, but nothing is really going down at the moment, which is not great," he says.

"I have a family as well, a couple of kids, and we just buy what we need."

Then you had deli worker Tima, who says their store is still seeing increasing spikes on things like imported cheese.

Oil has also gone up a lot, to the point where people aren't buying Italian vats anymore because it's too expensive.

Tima feels for her boss. The deli is seeing lower trade, as customers battle the rising cost of living, and perhaps go to supermarkets for cheaper packaged food to make ends meet.

Rabobank's analyst Michael Harvey says the "good news" is that food inflation is easing, but that processed foods are still really impacted.

Now food prices are getting increasingly political. There are now several inquires going on into pricing and potential gouging, including some specifically on supermarkets.

Yesterday, the Albanese government annnounced it has appointed Craig Emerson to head up one of those inquiries into the (voluntary) code that connects suppliers to grocery retailers.

"You've got consumers on one hand feeling the pinch, and then on the other hand producers saying we are not getting a good price," he told the media.

Coles and Woolies say their prices are fair. And they say, they are passing on supplier cuts. But some shoppers aren't convinced.

"Their prices are crap," one person at Preston markets said to me, adding that their fresh produce shop was $30 at the markets when it would blow out to $50 at a supermarket.

"(The supermarkets) aren't like this place where there is a community.

To watch more, here's the TV story that aired.

As we approach the middle of the trading day, the financial and consumer discretionary sectors are the standout gains on the ASX.

Both are up around 0.9%, with tech, real estate and consumer non-cyclicals also doing well.

Industrials and energy are the two sectors in the red, with mining just in the black.

Shortly after 12:30pm AEDT, 134 of the top 200 companies were in the black, with only 59 in the red.

Engineering services firm Worley was deepest in the red, down around 4% as it resumed trading following corruption allegations made in an international tribunal finding and published earlier this week by The Australian newspaper.

Overall, the ASX 200 index was 0.5% higher at 7,503 points shortly after 12:40pm AEDT, while the Australian dollar had advanced further above 67 US cents.

Australia's trade surplus has surged by almost $3.8 billion in November, with the nation exporting $11.4 billion more worth of goods than it imported.

But it wasn't all great news.

While goods exports rose by nearly $800 million (1.7%) mainly due to increased coal shipments, a slump in imports drove most of the trade improvement.

Goods imports fell by almost $3 billion, driven largely by a near $1 billion (26%) fall in the value of "non-industrial transport equipment" — i.e. cars — when compared to October.

JP Morgan's Jack P Stinson says too much can't be read into that number.

"Volatility in motor vehicle imports was extremely pronounced in 2023, so some payback is likely in December's print," he wrote.

But consumption goods imports fell across the board (-14%), perhaps indicative of weakness in household demand as rate rises really started to bite over the second half of last year.

Capital goods — things used by businesses such as industrial transport equipment — fell 2.8% in November, while intermediate goods — consumed in production processes — fell 3.8%.

While the Reserve Bank of Australia isn't meeting this month, the northern hemisphere isn't in summer holiday mode.

The central bank in South Korea met today and Ankita Amajuri from Capital Economics had this analysis of its decision.

"The Bank of Korea (BoK) left its main policy rate on hold today (at 3.5%), but with inflation cooling and growth set to struggle, we think the central bank will cut interest rates sooner than most expect.

"The decision was correctly predicted by all 38 forecasters polled by Reuters, including ourselves. Interest rates have now been left unchanged since a cut in January last year."

The analyst is, however, expecting rates to fall in Korea at upcoming meetings this year.

"A key reason why we expect rate cuts soon is that price pressures are easing.

"Inflation in December fell back to just 3.2% y/y due to a drop in food and gasoline inflation. Given our forecast that oil prices will fall back over the coming year, energy price inflation is likely to ease further.

"In addition, a weak economy will help to put downward pressure on underlying prices. Our forecast is that inflation will be back to the central bank's 2% target by mid-year."

#ICYMI, yesterday's release of the November monthly Consumer Price Indicator figures from the ABS showed disinflation continuing apace in Australia.

My colleague Emilia Terzon had this neat, quick video summary for 7pm News.

But if you prefer reading rather than watching, we had this story covering the major aspects of the data and its implications for interest rates.

It's that time of year again.

For the 54th time, a collection of the world's richest and most powerful people will meet in the Swiss town of Davos next week for the World Economic Forum annual meeting, January 15-19.

The talkfest of business, government and civil society leaders is tackling the theme of "rebuilding trust" in 2024.

Many of them should have a fair bit of personal reflecting to do on that topic.

WEF organisers have published a list of some of the key people attending, which you can read here, but some highlights from government:

Antony Blinken, US Secretary of State; Li Qiang, Premier of the People's Republic of China; Emmanuel Macron, President of France; Ursula von der Leyen, President of the European Commission; Javier Milei, President of Argentina; Han Duck-soo, Prime Minister of the Republic of Korea; Pedro Sánchez, Prime Minister of Spain; and Volodymyr Zelenskyy, President of Ukraine, amongst many others.

From international organisations:

António Guterres, UN Secretary-General; Kristalina Georgieva, Managing Director, International Monetary Fund; Ajay S. Banga, President, World Bank Group, Ngozi Okonjo-Iweala, Director-General, World Trade Organization; Jens Stoltenberg, Secretary-General, North Atlantic Treaty Organization; Tedros Adhanom Ghebreyesus, Director-General, World Health Organization.

As well as an estimated 1,600 business leaders, including 800-plus of the world's top CEOs and chairs from the World Economic Forum's members and partners, plus more than 150 global innovators, tech pioneers and unicorns who are transforming industries.

The WEF says more than 200 sessions will be live-streamed "to be informative and accessible to the wider public".

It's one of Australia's biggest industrial hubs, but the city of Kwinana, south of Perth, is undergoing massive upheaval as old fossil-fuel dependent industries shut down.

Will there be enough new jobs in renewables and other sectors to replace what's being lost?

My WA colleagues Daryna Zadvirna, Rebecca Trigger, Claire Moodie and Bridget McArthur take a look in this article.

There's been increasing pressure on the federal government to intervene to resolve a workplace dispute over the pay and conditions that will go into a new enterprise agreement for DP World port workers.

Industry groups are concerned that the dispute could spiral into lock-outs and/or strikes that would cripple around 40% of container movements into and out of Australia.

This week, workers at four sites run by DP World have been warned by the company that could see a full day's pay docked if they try to "cherry pick" which jobs they work as part of ongoing industrial action.

Michele O'Neil, President of the Australian Council of Trade Unions says that is "counterproductive", the enterprise bargaining proposals put forward by the company are "unreasonable" and she is urging DP World to "step back from escalating" the situation.

The answer you get depends on whether you ask the government or the opposition, although the truth is probably a bit of both.

As economist Chris Richardson pointed out, Australia lagged much of the developed world in inflation rising, we therefore lagged in interest rates rising, and it is not surprising that we're also lagging on price rises coming back down.

"We've made some good progress, but we need to go further because people are still under the pump," said treasurer Jim Chalmers on 7.30 last night.

"And one of the most encouraging aspects of the numbers today is that the ABS has said without our policies on electricity rebates and rent assistance, inflation would be much higher in our economy. And that's why the Opposition needs to explain why they voted against that cost-of-living relief, which is helping to put that downward pressure on inflation."

His opposition counterpart Angus Taylor says, even with those measures, Australians have just suffered the largest fall in real household disposable incomes in the developed world over the past financial year.

"That's a triple whammy that we're being hit with — higher prices, and they continue to go up sharply, higher mortgage payments, and higher taxes," he told RN Breakfast this morning.

"We've seen a 27% increase in income tax that's being paid by Australians.

"And all of those things combined mean that we've seen this very sharp standard of living drop for Australians, and it has been the worst, the worst performance of the world."