Christmas retail sales slump on consumer pessimism, ASX near record high — as it happened

And that's a wrap! Thanks for following the market blog.

Just to recap: the ASX 200 wasn't able to hit a record high today, retail sales fell by a steep 2.7% in December (more signs consumers are worried about cost-of-living issues), and Godfreys has gone into voluntary administration (with 193 workers expected to lose their jobs).

Tomorrow will be an interesting day, with the ABS releasing its inflation data for the December quarter.

The Reserve Bank will be scrutinising those figures closely to determine whether to lift interest rates again.

In the meantime, have a nice evening!

Close ... but no cigar. (That's how I'd sum up the Australian share market's performance today.)

The ASX 200 almost hit a record high this morning, before much of the excitement fizzled out.

It climbed as high as 7,631 points (just two points shy of its highest level ever).

But in the end, the benchmark index rose 0.3%, to finish at 7,600 points (with industrials, tech and real estate being the top-performing sectors).

Regardless, the share market has been on a very optimistic streak — having risen for its seventh straight day.

(In case you're wondering, the ASX 200 hit a record high of 7,633 points on 13 August, 2021).

Now here are the best and worst performing stocks:

Shares of Brisbane-based Megaport jumped 27.6%, making it today's biggest winner.

This was after the cloud network service provider reported financial results which beat market estimates.

Megaport revealed its second-quarter operating earnings were $15.1 million (compared with a Visible Alpha consensus estimate of $11.3 million, according to Citi).

Meanwhile, shares of Nickel Industries jumped 20.8%, after the company increased its dividend and announced a share buyback (valued at up to $151 million).

Many of today's best performing stocks were mining stocks.

On the flip side, the companies posting the heaviest losses were retailers JB Hi-Fi and Super Retail Group, along with financial stocks AMP, QBE Insurance, Suncorp and Netwealth Group.

It's going to be an exciting program on The Business tonight.

Here's what the host Kirsten Aiken is telling me:

There are serious concerns at Boeing, with whistleblowers telling our reporter Nadia Daly the aviation giant is compromising the safety of its fleet.

And what will be the fallout from the liquidation of Evergrande? Fidelity International's investment director Catherine Yeung joins us to talk about the fate of the world's most indebted property developer.

Meanwhile, Tribeca Investment Partners' portfolio manager Jun Bei Liu shares her 2024 outlook for the ASX.

You can watch the program on ABC News at 8:44pm (AEDT), or after the late news on ABC TV.

Alternatively, you can also stream The Business any time on ABC iView. See you soon!

Will there be a recession this year?

AMP's deputy chief economist Diana Mousina and NAB's chief economist Alan Oster offer their predictions on interest rates, inflation and what 2024 will bring:

Australia's most popular car manufacturer is pushing hydrogen-fuelled vehicles.

Some energy economists say Toyota's bet isn't paying off and our government shouldn't waste money on fuelling infrastructure that could become "white elephants".

Just six hydrogen cars were sold in Australia last year, compared to 87,000 electric vehicles.

Our reporter Emilia Terzon talks to Grant Burton about why fuel cell cars are working out better for his security firm:

Elon Musk has always been a trailblazer.

Long before he helped spark a revolution in the future of automobiles, he foresaw the need for payment security in a digital world and earned his first fortune as a co-founder of PayPal.

Along the way, he has explored the outer reaches of space, controversially taken control of one of the world's biggest social media sites and experimented with the idea of, not just Artificial Intelligence (AI), but linking human brains to computers.

Right now, however, legions of investors are concerned about Musk's increasingly erratic behaviour while his competitors are fearful they may end up following the path he is treading.

For more on this, here's the latest column by business editor Ian Verrender:

The Albanese government has announced changes to the stage 3 tax cuts, which were due to begin on July 1, 2024.

But what do these changes actually mean?

What's different, and who are the winners and losers?

If you're after simple answers to those questions, you're in luck! My colleague Michael Janda explains it all in this video:

• ASX 200: +0.3% at 7,602 points (live figures below)
• Australian dollar:  flat at 66.1 US cents
• Dow Jones: +0.6% to 38,333 points
• S&P 500: +0.7% to 4,927 points
• Nasdaq Composite: +1.1% to 15,628 points
• Spot gold: flat at $US2,032/ounce
• Brent crude: +0.2% at $US82.58/barrel 
• Iron ore: +0.9% at $US135.10/tonne
• Bitcoin: +0.9% at $US43,549

(Prices current as of 2:20pm AEDT)

Live updates on the major ASX indices:

China Evergrande's shares are still suspended from trading on the Hong Kong stock exchange.

This was after a Hong Kong court ordered the debt-ridden company to be liquidated on Monday, as it was unable to reach a restructuring deal with its offshore lenders.

News of the verdict caused Evergrande's share price to plunge by more than 20%, before the trading suspension was imposed.

At its peak, Evergrande was China's second largest property development firm, worth around $80 billion.

Now it's worth around $400 million, and its share price slumped by 99%  in the past five years.

Here's the handy summary I did yesterday on the ABC News Channel  — on how Evergrande got into this mess, and the implications of its collapse:

Godfreys — which brands itself as one of the world's largest vacuum retailers — has gone into voluntary administration.

Founded in 1931, the company employs more than 600 staff in Australia and New Zealand (across 141 stores). It also has 28 stores run by franchisees.

PwC has been appointed as the company's administrator in both countries. Godfreys will continue to operate its business, while undertaking an "immediate operational restructure" and sale process.

Godfreys expects to shut down 54 stores in the next fortnight. As a result, 171 staff in Australia are expected to lose their jobs, while 22 in New Zealand will be sacked.

The first creditors' meeting will be held on February 9.

If the Godfreys brand name sounds vaguely familiar, you may remember some of their colourful TV ads (which showed their vacuum cleaners sucking up a bowling ball):

"Like many retailers, Godfreys has faced a challenging economic and operating environment," said Craig Crosbie, the lead administrator from PwC Australia.

"Lower customer demand amid cost of living pressures, higher operating costs, and increased competition have all taken a toll on profitability, with some stores more impacted than others.

“Our aim is to move quickly to restructure Godfreys to preserve as much of the business and as many jobs as possible.

Godfreys director Mr Grant Hancock said it was a difficult decision to enter into administration.

He said it was made with the best interests of Godfreys’ employees, customers and broader stakeholders in mind.

As noted in previous posts, December's big falls for household goods, department store and clothing sales were broadly expected, given November's Black Friday spending spree.

What has caught a lot of analysts by surprise was the notable 1.1% slump in seasonally adjusted turnover at cafes, restaurants and takeaway outlets.

While we've changed our retail spending habits, surely we're not all suddenly throwing our end of year/summer parties in November instead of December?

One interpretation is that this reflects households tightening their belts in response to the rising cost of living, especially amid rising mortgage rates and tax bills.

I think it's hard to argue against a lot of that going on, given the very low levels of consumer confidence and the recent trends in this sector — CBA's Stephen Wu points out that it's the fourth consecutive monthly decline for eating out, to now be 5.7% below its September 2023 peak.

But one other factor may have been a COVID case spike in December, which could have kept a lot of people at home — it kept me and my immediate family stuck at home on Christmas Day :(

This ABC story looked at the spike in cases and, as it noted, this is likely understated given that most people just do a RAT at home now (if they even bother doing that) rather than testing at a clinic and being recorded in the official data.

While there's a lot of seasonal adjustment shenanigans going on due to the increasing popularity of Black Friday sales in November, December's retail slump is almost unprecedented.

So, retail sales bounced 1.6% in November before plunging 2.7% in December.

That drop in December is the worst seasonally adjusted monthly result in the four-decade history of the retail sales data outside of two months in 2020 (COVID) and July 2000 (the introduction of the GST, when many prices went up 10% literally overnight).

Even if you deduct the November bounce from the December fall (to try and account for the shift forward in spending habits) a 1.1% fall would be the equal 21st worst in more than 500 months of retail sales data.

Whichever way you cut it, these are recessionary numbers, which Capital Economics analyst Abhijit Surya says will weigh massively on economic growth, as measured by GDP.

"As a result of the weak December result, sales values rose by just 0.5% across Q4," he noted.

"Therefore, even if retail price gains moderated slightly, we believe that sales volumes will have contracted anew last quarter. If we're right, real goods consumption will almost certainly have seen another leg down in Q4."

With household consumption well over half the economy, that raises the real risk of a negative quarter of GDP … and therefore increases the spectre of a technical recession.

Australia's strong population growth plus the level of inflation over the past year makes annual retail sales growth of just 0.8% absolutely abyssmal.

Mr Surya says only food retailing escaped a monthly decline in December (+0.1%), with a 1.1% drop in spending at cafes, restaurants and takeaways not affected by Black Friday sales and suggesting customers may be reining in spending more broadly.

"The upshot is that the Australian consumer is on much shakier ground than the RBA had anticipated," he argued.

"Accordingly, we're sticking with our view that the Bank will start cutting rates by May, rather than in September as most analysts are predicting."

Last month's Christmas and Boxing Day sales were worse-than-expected for Australian retailers.

Consumers spent $35.19 billion at the shops in December, seasonally adjusted, according to the latest data from the ABS.

While that's a large sum of money, it's also a 2.7% drop (compared to the previous month).

(Economists were expecting a milder 1% drop in retail turnover).

It follows a 1.6% increase in November, seasonally adjusted, which received a massive boost from the increasingly popular Black Friday sales.

"The large fall in retail turnover in December was caused by a fall in discretionary spending," said Ben Dorber, head of retail statistics at the ABS.

"Consumers brought forward some of their usual December spending to November to take advantage of Black Friday sales.

“This shift in spending from December to November reflects the growing popularity of Black Friday sales and the impact of cost-of-living pressures, with consumers seeking out bargains and taking advantage of discounts in November."

Whistleblowers are warning production defects on Boeing planes haven't been addressed by the company or the US regulator, putting travellers at greater risk of being involved in an incident.

The aircraft maker has faced increased scrutiny in recent weeks after its most commercially popular but scandal-plagued plane (the 737 Max) was involved in another mid-air emergency when a hole blew open in the fuselage of a 737 Max 9 Alaskan Airlines flight earlier this month.

The ABC has spoken to former Boeing and FAA workers who allege they raised safety concerns with the company and the watchdog but they were ignored.

The whistleblowers' interviews paint a picture of a company culture that prioritises production speed over quality and safety, leading to defects being missed or ignored to meet deadlines.

For more, here's the exclusive story by Nadia Daly:

Hello there! I'm jumping in to help Kate with today's blog.

Here's an interesting chart which shows consumers are feeling deeply pessimistic these days (almost as if they were living through a recession):

Consumer confidence fell to 82.5 points, according to ANZ and Roy Morgan, which surveyed 1,511 consumers last week. (It's down 1.9 points compared to the previous week).

That's a score that's typically seen during an economic  downturn (eg. the COVID recession, and the global financial crisis in 2008).

Any score below 100 points means the pessimists outweigh the optimists.

In short, it's not good for business if consumers are feeling gloomy and cutting back on spending (especially on discretionary items) due to higher interest rates and cost-of-living pressures.

The ASX 200 has hit a four-week high in the opening minutes of trade, up 0.5% to 7,617 points at 10:30am AEDT.

(For live figures at any time, head to the top of the blog.)

Megaport is the top performing stock so far, up more than 25% after reporting its revenue had risen by 5% to $48.6 million in its latest quarterly update.

Looking at the sectors, industrials is the biggest mover, up 2%, followed by technology (+1.3%), academic and educational services (+1.3%) and real estate (+1%).

The rest of the sectors have had more modest increases, including healthcare (+0.9%), basic materials (+0.7%), consumer cyclicals (+0.7%) and utilities (+0.4%).

Both consumer non-cyclicals and financials have gained 0.2%, while energy has fallen by 0.4%.

As for the top five performers so far:

• Megaport +25.4%
• Nickel Industries +17.5%
• Block +6.4%
• Chalice Mining +6.2%
• Liontown Resources +4.5%

And the bottom five performers:

• Netwealth Group -4%
• Perpetual -3.6%
• Coronado Global Resources -1.8%
• New Hope -1.7%
• Nanosonics -1.7%

• ASX 200: +0.5% at 7,617 points (live figures below)
• Australian dollar:  +0.1% at 66.13 US cents
• Dow Jones: +0.6% to 38,333 points
• S&P 500: +0.7% to 4,927 points
• Spot gold: -0.1% at $US2,029/ounce
• Brent crude: -1.3% at $US82.46/barrel 
• Iron ore: +0.9% at $US135.10/tonne
• Bitcoin: -0.2% at $US43,100

(Prices current as of 10:30am AEDT)

Live updates on the major ASX indices:

The Commonwealth Bank says oil prices will stay elevated as a result of the tensions between the US and Iran, despite a slight dip after Iran-backed militants attacked a US base in Jordan on Sunday.

"If US‑Iran tensions escalate, particularly through a direct confrontation, the risk rises that Iran's oil supply is adversely impacted," the bank's commodities analyst Vivek Dhar said.

"[Iran's] oil exports are likely the most vulnerable via potentially greater enforcement of sanctions.

 "How Iran responds to rising US tensions will also dictate the course for oil markets. The key concern is Iran threatening a blockade of the Strait of Hormuz, which sees the transit of 15‑20% of global oil supply."

Mr Dhar notes that the recent rise in oil prices "mostly reflects the higher risks" of Iran being caught up in the wider conflict in the Middle East, especially after a tanker carrying Russian fuel was attacked over the weekend.

"Despite the escalation in attacks in the Red Sea and the 6.5‑7% of global oil and fuel supply that transits through the waterway, oil supply still remains largely unaffected given tankers can re‑route between Asia and Europe around Africa," he said.

"The Red Sea and Suez Canal has become an increasingly important sea route for Russian oil and refined products to Asia due to western sanctions following the Ukraine war.

"The route around Africa takes around an additional two weeks compared to the Suez Canal and Red Sea, thereby incurring additional labour and fuel costs.

"In our view, these two options surmise the main impact of the Red Sea disruption — an increase in transport costs between Europe and Asia.

"Oil prices though should remain fairly resilient to the Red Sea disruption given oil supply is still flowing."

If you're a renter, I have some grim news to share (although, it might not come as a shock).

The latest data from PropTrack shows rental properties are becoming harder to find as listings hit historic lows.

PropTrack's Rental Report for December shows new rental listings last month were 4.6% lower than the year before, while total rental listings also hit a record low of 4.7% annually.

"It's still an extremely challenging rental market with very low volumes of stock," PropTrack's economic research director, Cameron Kusher, told AM.

"Of course, we've got strong population growth, which is putting more competition for the rental market, and we're seeing a higher level of demand for rental properties.

"So unfortunately, for those that are looking to rent, it's still a very tough slog out there in the market."

Although the data shows the pace of rent increases is starting to taper off (it only increased by 11.5% in 2023, compared to 15.6% in 2022), there is little relief on the horizon for renters.

While it's hard to determine from the data, Mr Kusher has told AM he suspects some renters are choosing to cop the rental increase they receive, instead of shopping around to find a new place to live that may not be any cheaper.

"It's hard to sort of see that in any of the data but I have a strong suspicion that that is happening," he said.

"I think if people have a rental, they're more inclined to stay there as long as they are in a position to be able to do that because everyone's seen on social media and and those sorts of things how many people are turning up for these rental inspections.

"So I think there is generally a strong preference to stay where you are unless the landlord is being completely unreasonable with how much they're asking for those rent increases."

You can listen back to the full story by Nick Grimm on AM below: