Mining and energy offset bigger falls on ASX amid surprise US inflation uptick — as it happened

The share market closed lower today, with the benchmark S&P/ASX200 index down 0.1% to 7,498.3 points, crossing below its 20-day moving average.

The Australian dollar was buying 66.87 US cents.

Oil prices rose after UK and US strikes in Yemen and tensions heighten further.

Here are the top winners and losers:

Worth keeping an eye on over the weekend are fast-moving developments in Yemen and what effect a broader Middle East conflict may have on markets.

That's it from us today on the blog. Thanks for joining us.

Catch up on developments below and have a good weekend, with lots of rest like this little capybara:

In case you forgot, we export a lot of stuff from the ground here in Australia, as this helpful graph illustrates.

(Courtesy of self-described former "RBA boffin" Justin Fabo)

Mining is Australia's most profitable industry and over time there have been calls for higher taxes on the sector. This article from last year by my Business colleagues take a very comprehensive look at the issue

Well yes, yes it is, according to the Australia Institute.

The think tank reckons the government could raise $1,300 per tonne of un-recycled plastic through a levy on businesses that import or manufacture plastic packaging.

That would be around $1.46 billion each year in government coffers.

The Australia Institute’s Circular Economy & Waste Program director Nina Gbor says recycling isn't working so we need to do something more to reduce our plastic consumption.

“We’re recovering less than a fifth of the plastic waste used each year, with consumption expected to more than double to nearly 10 billion tonnes by 2050.

"If recycling was the solution to the plastic waste crisis, it would have been solved by now. Instead, it just encourages the production and consumption of even more waste that is choking our landfill and oceans."

According to the Australia Institute, only 14% of the plastic we throw away here is recovered through recycling or composting.

The EU already has a tax on plastic, where each country must pay up in proportion to the amount of non-recycled plastic packaging they throw away.

Interestingly, technology here in Australia is being developed to turn plastic waste into petrol. I did a story on it a few years back:

Some very useful commentary on that ABS household spending data from UBS Australia chief economist George Tharenou.

He points out that the 3.1% annual rise is the weakest since February 2021, which covered the first year of the COVID pandemic.

Moreover, that result didn't see anywhere near the same boost from rising prices that are elevating the level of household spending now, even as the quantity of goods and services we are buying is falling.

"Nominal spending is clearly being boosted by rising prices," Tharenou wrote.

"Overall, the household spending indicator suggests the trend of total real consumption growth continues to be quite weak, especially given booming population growth of ~2½% y/y.

"At face value the HSI implies total volumes growth remains close to ~flat. However, data is subject to significant upward revision.

"Indeed, the resilience of retail sales, and ongoing strength of car sales, still suggests some upside risk to our forecast within our GDP profile, which assumes Q4 real consumption is close to flat q/q.

"That said, overall the big picture remains broadly consistent with our view, expecting the consumer to remain on a clearly weak trend, but still not showing a collapse."

After early falls approaching half a per cent, the ASX 200 is down just 0.1% by the middle of the trading day.

The sectors that had been in the black — energy and mining — have extended their gains, while tech and consumer cyclicals have swung from losses to modest gains.

The big financial sector, including the major banks, has cut its losses, with the big four now off just between 0.1-0.2% each.

Asian markets are generally gaining in their early trade, with Tokyo's Nikkei a standout as it continues its good run.

My colleague Dan Ziffer analysed this in his 7pm Finance report last night.

After Tuesday's November retail sales data, some more interesting info out of the ABS on what Australians are spending money on.

The data show household spending increased 3.1% through the year to November on a current price, calendar adjusted basis.

Through the year, household spending increased for services (+6.2%), while goods spending remained unchanged (0.0%).

That would reflect a combination of disinflation, and even deflation, across a lot of imported goods, but also a lack of demand for the more discretionary items.

The ABS said that, through the year, households spent a lot more on essentials, but pretty much the same as last year on non-essentials.

"Non-discretionary spending rose 5.8 per cent compared to November last year, as spending on transport and health increased by 8.3 per cent and 7.8 per cent respectively," noted ABS head of business statistics Rob Ewing.

"Meanwhile, Black Friday sales boosted discretionary spending in November, similar to the previous year, so that households spent 0.3 per cent more than November 2022 on discretionary goods and services.

"Spending on furnishings and household equipment was 1.7 per cent higher than the same time last year, while clothing and footwear fell 0.1 per cent."

You'd think the Reserve Bank would be looking at these numbers and thinking that the interest rate rises it's already implemented are working exactly as intended to take demand out of the economy.

Although the rise in services spending would worry the RBA, it's clearly skewed towards essential services like health and insurance, so not too much that raising rates further will do about that.

If you've tried to buy anything on Ebay, Amazon or Etsy you may have noticed there are a lot more sellers flogging the same types of products.

This is partly due to the rise of the so-called 'dropshipping' business model. It's become popular in recent years, allowing people to have a side hustle during the pandemic.

But what is it exactly? And is it all it's cracked up to be?

I must confess, I'd never heard this term before I listened to Clare O'Halloran's report on RN Breakfast this morning. Well worth a listen.

While some markets have recently seen modestly falling home prices, notably Melbourne, the ABS lending finance figures suggest there's still a bit more life in the current housing boom.

As you can see from the above graph, housing finance is very correlated with home value moves.

The relationship works both ways. When more people borrow more money it tends to push up prices, but rising prices also force people who can to borrow more money to get the property they want.

The latest ABS figures from November show home loan demand was still quite high and rising towards the end of last year.

In seasonally adjusted terms the value of new loan commitments for total housing rose 1.0% to $27.6 billion, after a rise of 7.1% in October. It was 13.1% higher compared to a year ago.

Of that, commitments for owner-occupier housing rose 0.5% to $17.9 billion and were 10.6% higher compared to a year ago, while investor housing loans rose 1.9% to $9.7 billion and were 18.0% higher compared to a year ago.

That suggests the rebound is stronger among investors, who now make up comfortably more than a third of new home loans by value.

Maree Kilroy from Oxford Economics says the state-by-state details, showing a fall in lending in NSW, suggest a divergence of property market performance will continue this year.

"Following the rebound over 2023, we expect 2024 will be a softer year with home prices increasing a more muted 2.7% nationally," she wrote.

"Units are expected to outpace houses as affordability pressures, migration patterns, and weak apartment completion volumes intensify competition in the city apartment markets.

"While Sydney and Melbourne are expected to record relatively softer growth, Perth is well-equipped to lead the pack as the city develops a more sizeable dwelling stock deficiency."

This remains an open question, with something around $20 billion set to be injected back into Australians' take home pay packets next financial year, from July 1, due to the stage three tax cuts.

Tom Crowley from the ABC's Parliament House bureau has taken a look at the issue.

Steven Hamilton, assistant professor of Economics at George Washington University, told him the inflationary effect was likely to be too small to make a difference to the merits of the tax cuts.

"My guess is the stage three tax cuts won't have anywhere near the stimulatory effect that their sticker value, and much public commentary, suggests," he said.

"The bulk of the dollar value of the cuts goes to those earning more than $80,000 per year, and a large share to those earning more than $180,000 per year … there aren't that many people [in that category] and they are likely to save a large portion," he said.

"Of course, that doesn't mean they're a good idea. It's just that inflation should not tip the scales dramatically when assessing their value."

You can read the full report below:

For those who aren't insomniacs or shift workers who listen to ABC local radio at 10:30pm, I had a really interesting chat with Dom Knight on Nightlife about what this year has in store economically.

It was based on the analysis piece published on Tuesday this week, but if you prefer to listen at your leisure, the audio is available below.

While US inflation may have surprised to the upside this week, the local downside inflation surprise in the ABS data on Wednesday has seen ANZ's economics team revisit their forecasts for the critical quarterly number due out at the end of the month.

"The monthly CPI indicators for October and November suggest that Q4 [fourth quarter] 2023 headline inflation will come in below the RBA's 4.5% y/y [year-on-year] forecast.

"We will continue to refine our estimate ahead of the 31 January quarterly release, but our early call is that headline CPI will have risen 4.2% y/y. We think the trimmed mean will be a little higher at 4.4% y/y, although this is still below the RBA's 4.5% y/y estimate.

"Such results would be consistent with no move from the RBA in February.

"Looking further forward the most recent US CPI release serves as a reminder that the return of inflation to more normal levels over 2024 is unlikely to be perfectly smooth."

This dovetails with ANZ's forecast that, while Australian interest rates may not rise again, they are unlikely to fall until very late in this year.

• ASX 200: -0.4% to 7,480 points
• Australian dollar: +0.1% to 66.94 US cents
• S&P 500: -0.1% to 4,780 points
• Nasdaq: Flat at 14,970 points
• FTSE: -1% to 7,577 points
• EuroStoxx: -0.8% to 473 points
• Spot gold: +0.2% to $US2,033/ounce
• Brent crude: +2.2% to $US78.48/barrel
• Iron ore: +1.1% to $US134.35/tonne
• Bitcoin: +0.5% to $US46,365

Prices current around 10:30am AEDT.

Live updates on the major ASX indices:

The Australian share market is declining, as foreshadowed by the futures market, after surprisingly high US inflation figures poured some cold water on strong expectations for a March rate cut by the Federal Reserve.

The benchmark ASX 200 index is down 0.4% in early trade at 7,478 points.

More than three-quarters of the top 200 stocks are down in early trade, with only 34 stocks in the black.

Most sectors are down, except the energy and mining industries, which are benefitting from a rise in key commodity prices overnight.

Brent crude oil, for instance, is up by more than 2%.

Utilities, industrials and tech stocks led the local falls.

The Australian dollar has recovered from an earlier dip, back at 66.95 US cents.

The surprise rebound in US consumer prices for the year to December to 3.4% (from 3.1% in November) rattled markets, but only a little, resulting in a flat finish for Wall Street's major indices.

IG market analyst Tony Sycamore sums up what appears to be the most common view.

"While the CPI numbers were uncomfortable, they don't change the narrative Fed rate cuts are coming," he wrote.

"However, if we were to see another warmer-than-expected inflation print next month, the chances of a March rate cut, currently at 73%, will get pared back to 20-25% as May becomes the more likely starting date."

However, Thomas Salopek, Federico Manicardi and Robert Smith at JP Morgan have a less sanguine view about inflation in 2024.

"While core inflation is continuing to trend in the right direction, we don't see the Fed in a rush to cut rates," they wrote.

"With all the key data now in hand, it's hard to see how the January FOMC meeting would result in guidance to ease at the subsequent meeting in March (as markets apparently still expect).

"Perhaps the Committee could soften the guidance toward a neutral bias, but that would be more consistent with easing further on in the year. We continue to look for a first cut at the June meeting."

If they are right, then that's likely to see a rocky first few months of the year on global markets, especially for shares, as traders have largely priced in a first Fed rate cut by March into their asset valuations.

"The strong rally in markets in Nov/Dec was largely due to the emergence of the immaculate disinflation thesis that would allow major central banks to cut rates aggressively towards neutral over the coming year, and significant investor re-leveraging and short-covering in a year-end performance chase," the JP Morgan analysts continued.

"However, the disinflation thesis is likely to be challenged during 1H24 (first half 2024) as the disinflation process stalls, equities appear overbought given low implied cash allocations and low short interest, and risks are rising for geopolitics to drive both a risk-off shift and a boost to inflation via increased shipping costs."

In short, they argue shares are due for a sell-off because traders have got ahead of themselves with rate cut expectations.

So exactly how many investors were hanging out to put their money into a Bitcoin exchange traded fund (ETF)?

It turns out quite a few.

Reuters is reporting that Bitcoin ETF turnover reached $US4.6 billion on the first day of trading on the markets.

That's about $6.9 billion in Aussie dollars, so nothing to sneeze at.

That also explains why so many big funds were desperate to get a Bitcoin ETF product approved by the SEC, because they all get to clip the ticket for some decent profits.

My colleague Kate Ainsworth has been well on top of the story about many The Iconic customers having fraudulent transactions made on their accounts, even before it broke on Tuesday.

Her detailed questions to the company provided an interesting insight into how it had been so easy for fraudsters to not only get into some customers' accounts, but then make a transaction using their payment details.

Q. Another email sent to an affected customer states that The Iconic does not store their credit card details, however they have had a fraudulent transaction made on their account. What is the reason for this discrepancy?

A. Any unauthorised access to THE ICONIC account will not give a fraud actor access to the customers card details, but a transaction may be made on THE ICONIC using this card.

Q. Does The Iconic require customers with saved credit card details to input a CVC/CVN to confirm the transaction?

A. No.

When The Iconic signed up to its current payments platform Stripe, that company's head of growth for its Australia and New Zealand branch, Hayley Hopwood, said the partnership "enables The Iconic to capture more revenue by reducing transaction abandonment".

Cyber security expert Richard Buckland from UNSW says anything that makes transaction easier usually also makes it less secure.

"Every bit of friction in the way, every bit of red tape protects you, but also slows you down," he told Kate.

"It's not in any organisation's interest for it to be hard for you to buy something, they like it to be as easy as possible.

"The easier it is for you, the more of a red flag it is."

Read more of Kate's story on how The Iconic left its customers more vulnerable to fraudulent transactions here.

It's a question I thought I knew the answer to. Like many Australians, I thought it was generally 14 years and nine months, with exceptions for family businesses.

Turns out, like many Australians, I was wrong.

My colleague Nadia Daly has looked into the issue and found there is no uniform national standard, with most states and territories having no absolute minimum on how old you need to be to work.

As Nadia reports, there are calls from unions and academics for uniform national standards around child labour.

These are a couple of the questions many people are asking following yesterday's decision by the US Securities and Exchange commission to approve 11 spot Bitcoin exchange traded products, also known as exchange traded funds (ETFs).

Professor Chris Berg from RMIT's Blockchain Innovation Hub explained the significance of the SEC decision on ABC News Channel with David Chau yesterday.

He also believes Australia will follow suit very soon.

To get a better understanding of what an ETF is and how the Bitcoin ones will work, Sally Sara had a very informative interview with AFR reporter Jessica Sier on RN Breakfast.

She did a great job of breaking it down in simple terms.

This news flash from Reuters:

Tesla will suspend most car production at its factory near Berlin from January 29 to February 11, the company said on Thursday, citing a lack of components due to shifts in transport routes because of armed conflict in the Red Sea.

"The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Gruenheide," Tesla said in a statement.

"The considerably longer transportation times are creating a gap in supply chains."