AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
- US jobs report pushes markets to reconsider Federal Reserve's policy, affecting ASX performance.
- Strengthening US dollar makes an impact on Australian exports and inflation outlook.
- Growth stocks like (NWH), (HUB), (PME), and others hit hard due to rising bond yields.
The beginning of 2025 has already highlighted a major theme impacting Australian financial markets – the concept of "American exceptionalism." This term, which reflects the belief in the unparalleled economic and market performance of the United States, has gained significant attention following a robust US jobs report for December. Payrolls increased by 256,000, far surpassing predictions, and the unemployment rate dropped to 4.1%. In response, US Treasury yields spiked, as investors anticipated interest rates would stay higher for longer.
This shift has far-reaching consequences for global markets, especially for Australia. Rising US Treasury yields, driven by higher anticipated Federal Reserve rates, make US assets more attractive and push the US dollar up. On Monday, the ASX bore the brunt of this move, leading to the worst trading day of the year so far.
The strengthening US dollar, at its highest levels since the pandemic, is already making an impact. While petrol prices have softened, export revenue for Australian businesses should improve. This upswing is critical in terms of Australia’s projected fiscal outlook. Some economists foresee Australia potentially achieving a budget surplus in FY25, boosted in part by stronger export performance from key sectors.
The power of US exceptionalism also influences Australian equity markets. While certain growth stocks suffered in Monday’s trading, particularly in the tech sector, analysts are observing how international earnings guidance evolves, especially for Australia’s offshore earners and major miners. Stocks such as (ASX:NWH), (ASX:HUB), (ASX:PME), (ASX:WTC), (ASX:SQ2), and (ASX:360) were the hardest hit, falling among the ASX's worst performers. For instance, Netwealth (ASX:NWH), Hub24 (ASX:HUB), and WiseTech (ASX:WTC) saw their stock values fall as rising bond yields put a damper on market sentiment.
This scenario is made more critical by the fact that key global economies such as the EU, UK, China, and Japan are showing slower or even negative growth, only intensifying the focus on American growth prospects. Australian markets, on the other hand, are looking toward global earnings from offshore operations. Strategists like those at Macquarie are projecting a strong 9% earnings growth for international industrial stocks in FY25, contrasting with a drop expected in resources earnings.
Looking ahead, Wall Street’s enthusiasm for the "American exceptionalism" narrative will likely continue to make waves across global markets, influencing everything from interest rates to stock market performance in Australia. Markets will have to adapt to these dynamics, and how companies like (ASX:BHP), (ASX:CSL), (ASX:RIO), and (ASX:TWE) navigate this environment will be pivotal in shaping the Australian investment landscape in 2025.
