According to CreditorWatch chief economist Anneke Thompson, the recent increases in the cash rate target are still yet to be fully felt by mortgage holders and businesses.
After the bloodbath on Wall St overnight, the ASX didn’t fare much better in today’s trade. At one point, the ASX 200 had dropped as much as 2.6%, wiping $63 billion from the ledger.
By the end of the day, the S&P/ASX200 was sharply lower, dropping 181.10 points or 2.58% to 6,828.60 ($59 billion wipeout) and crossing below its 50-day moving average. Over the last five days, the index has gained 1.48%, but is down 8.27% for the last year to date.
The bottom-performing stocks in this index are Megaport Ltd (ASX:MP1) down 9.55% and Clinuvel Pharmacueticals Ltd down 7.82%.
Tech and real estate stocks were the drag, as investors reacted to the US Fed and the likelihood it will raise rates by 0.75%.
Goodman Group (ASX:GMG) Ltd took one of the biggest hits in the real estate sector, falling 4.88%. Xero led tech losses, with a 4.78% fall.
Financials also underperformed with the big four banks all falling into the red.
Looming rate rises would lead to further selloffs said VanEck head of investments and capital markets Russel Chesler.
“Many global company balance sheets are going to come under pressure when they refinance debt from historically low levels to the currently increasing interest rate,” he said.
“We believe that Australia’s share market is likely to continue outperforming the US share market; we may not see Australian official rates rise as much as US rates as our inflation rate isn’t quite as high.”
Chesler backed gold to perform well in the current climate.
Looking at the sectors, all were in the red with Energy losing 2.31%, Industrials down 2.43%, Consumer Discretionary plummeting 3%, Consumer Staples down 2.64%, Financials minus 2.77%, Information technology down 3.51% and Real Estate the hardest hit down 3.78%.
Suffice to say, investors will be glad the day is over.
The August 2022 CreditorWatch Business Risk Index (BRI) released today shows trade payment defaults have surged to their highest point since October 2020.
Payment defaults are now up 53% year-on-year.
Court actions, another key indicator of business insolvency, also continue to rise –up 51% year-on-year.
While external administrations were down 9% from July to August, they remain up 58% year-on-year and 129% since January.
CreditorWatch has forecast a continued rise in business insolvencies due to high inflation, rising interest rates, labour shortages and supply chain disruptions.
There is a positive, however, trade receivables (the average value of invoices) are at their second highest point since June 2021, and up 11% year-on-year, although NSW and Victoria were heavily impacted by lockdowns in August 2021.
CreditorWatch CEO Patrick Coghlan said rising payment defaults was a disturbing trend but not unexpected.
“Our Business Risk Index data has been forecasting a rise in B2B payment defaults for some time now. The multiple challenges confronting many businesses, whether they be rising inflation and interest rates, labour shortages or the ongoing impacts of the COVID-19 pandemic, are all conspiring to make it that much tougher to pay invoices.”
According to CreditorWatch chief economist Anneke Thompson, the recent increases in the cash rate target are still yet to be fully felt by mortgage holders and businesses.
"The financial Impact of monetary policy tightening does take some time to be felt in the repayments schedule of mortgage and business loan holders,” she said.
“We expect that the real pressure will start to mount by October/November, right before the Christmas shopping period. The RBA will be watching consumer spending patterns intently over this time to gauge any change in the behaviour of consumers.”
Prime Minister Anthony Albanese will consider shifting down on more COVID restrictions at a meeting of national cabinet on September 30.
The PM is currently analysing the impact of the move by other countries to loosen restrictions and treat COVID like any other health issue.
The move comes as infections in aged care, the hardest hit sector, were just a quarter of their peak in July.
Albo said that risk factors had now changed with a high percentage of vaccinations in the community and a lowering of transmission.
"We will have a discussion about future arrangements on September 30 when the national cabinet will meet in person," Albanese said.
"We will take advice at that time because there are different arrangements in place, in countries but what we are seeing is gradually a move towards COVID-19 been treated like other health issues and clearly, we saw with the reduction that we made last time from seven days to five days, we are making some preparations as well over a potential blade during the northern winter so that is preparation and how will respond to them will be a source of further discussion from chief health officers but there was no discussion about the detail as to changes, we will take advice on that, and will make a decision at an appropriate time.”
Twitter shareholders have approved Elon Musk’s offer to buy Twitter and want the billionaire to hold to his word.
However, the $44 billion offer may not be on the table with Musk doing all he can to scupper the deal.
“Twitter stands ready and willing to complete the merger with affiliates of Mr Musk immediately, and in any event, no later than on September 15, 2022, the second business day following the satisfaction of all conditions precedent, which is the timeline required by the merger agreement,” the company said in a press release.
Approximately 98.6% of the votes cast approved the proposal to adopt the merger agreement.
Musk will fight Twitter’s demand that he close the deal at the $54.20 share price that was previously agreed on. Twitter’s share price is now significantly lower.
“Twitter’s share price is nearly 24% off what Elon Musk offered for the social media company in April, therefore it’s no surprise shareholders have waived through the deal,” eToro market analyst Josh Gilbert said.
“In the past three months Musk has tried to pull out of the deal three times, claiming in part that Twitter has been less than transparent about spam and bot accounts on the platform, with the case now going to court.
“While today’s vote is important and clearly indicates a willingness among shareholders for the board to accept Musk’s offer, we have a bizarre situation where whether the deal goes ahead or not will be decided in the courtroom rather than the boardroom.
“We could see some volatility in Twitter’s share price over the coming months, and if investors feel like the episode is becoming a distraction for Musk, then we might see the same with Tesla shares too.”
Anson Resources Ltd (ASX:ASN) has wrapped up resource definition drilling at Cane Creek 32-1 well at the Paradox Lithium Project in Utah, USA, with initial assay results confirming the project’s resource expansion potential.
Altech Chemicals Ltd (ASX:ATC) has formed a joint venture with Fraunhofer IKTS to commercialise a 100 MWh CERENERGY® SAS battery project to be constructed on Altech’s land in Germany.
Tietto Minerals Ltd (ASX:TIE) remains on track for the first gold pour during the December quarter at its 3.45-million-ounce Abujar Gold Project in Côte d’Ivoire, West Africa.
Radiopharm Theranostics Ltd (ASX:RAD) and the University of Texas MD Anderson Cancer Center have launched Radiopharm Ventures, LLC, a joint venture company created to develop novel radiopharmaceutical therapeutic products for cancer.
Lake Resources NL (ASX:LKE, OTCQB:LLKKF) technology partner Lilac Solutions has completed two major milestones: 1,000 hours of operation and 2,500 kilograms of lithium carbonate equivalent produced at Kachi's Lilac Pilot Unit.
US Student Housing REIT (ASX:USQ) managing director Andy Feinour speaks with Proactive at the ASX Small and Mid-Cap Conference September 2022.
Clean Teq Water Ltd works with a focus on municipal wastewater, surface water, industrial wastewater and mining process water.
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