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Monday Market Minutes: The Kitchen Sinks

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2023-04-02

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If, at the start of 2023, you had believed that the first quarter would see a couple of unknown US banks and a faded Swiss financial giant go close to plunging world markets into a repeat of the 2008-09 GFC, then you should by now be extremely wealthy and retired with your fortune to some place like Australia.

But that’s not me or you and by Friday, most investors had calmed down as the end of the month and quarter approached, leaving sharemarkets putting the banking hiccups behind them and eyeing off gains in the new quarter.

After a surging start to 2023 in January, driven by the end of Covid restrictions in China and a growing belief that central banks would soon start easing monetary policy, markets hit the wall in February and then nearly tanked in March.

February saw a retracing by major indexes after the US Federal Reserve made it clear there would be no early easing, China's re-opening proved to be weak and then the failure of three US banks almost toppled everything and sent markets to the edge of a crunch that recalled the GFC.

The banking problems were a real shock, coming from small regional banks in Silicon Valley and San Francisco. Some of the worst nervousness was overblown because it didn’t impact globally systemically important banks in the US, Europe, the UK, Australia and Japan - except a weakened Credit Suisse which was a mess just waiting to be disposed of because of its long list of problems.

While rate rises continued, wages didn’t spiral, labour markets remained solid, but retail sales were weaker as inflation eased, slowly.

But the big driver (saviour?) of global markets in the first quarter was the outperformance of the tech sector, led by giants like Tesla (up 91% in the quarter), Meta Platforms (up 70%), Apple (up 32%), Microsoft shares up 21.5%, Amazon shares up 20.3%, Netflix shares up 17% and Alphabet shares up 16.4%.

Apple’s value rose past $US2.6 trillion (It added nearly $US600 billion in value in the quarter) and Microsoft shares closed Friday valued at $US2.15 trillion.

Oddly, Apple’s surge in the quarter didn’t help Berkshire Hathaway, its second-largest shareholder. Shares in Warren Buffett’s company eased 0.8% over the quarter after a 0.7% rise in March.

The big tech surge is why Nasdaq jumped 16.7% for its strongest quarterly gain in a quarter for three years.

Friday saw the S&P 500 rise 1.44% to close at 4,109.31, while the Nasdaq Composite gained 1.74% to end at 12,221.91. The Dow jumped 415.12 points, or 1.26%, closing at 33,274.15.

The three main indexes each jumped more than 3% over the week.

For the month, the S&P 500 closed 3.51% higher, while the Nasdaq added 6.69%. The Dow was up 1.89%.

For the quarter: the S&P 500 advanced 7.03%, and the Nasdaq rallied 16.77%. The Dow inched higher by 0.38%.

After a 6.2% rise in January, the S&P 500 added just 0.8% in the next two months and that flowed from the late surge in March.

Stocks mounted a comeback in the latter part of March when the US Federal Reserve and other central banks steadied things by flooding markets with cash and deposits for smaller banks after the failure of two regional banks, the forced-takeover of Credit Suisse triggered the flight of deposits from smaller institutions.

US regulators closed, took over and sold most of Silicon Valley Bank - as well as Signature Bank - and also set up a special lending facility for other banks, all of which helped stem the crisis.

By the end of the week, that seemed to have calmed the unease in the US banking sector, setting up what could be a solid April and second quarter.

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The ASX-200 will start second quarter trading later today looking to continue the momentum from the 45-point gain on Friday, the final day of the first quarter.

That was after Australian shares rose for the fourth straight day on Friday, amid a mining rally boosted by higher gold prices.

The S&P/ASX 200 Index rose 55.50 points, or 0.8%, to 7,177.80 by Friday’s close. That was the highest close since March 9.

That saw a rise of 3.2% in the final week of the quarter, but a fall of 1.45% in March.

For the quarter, the ASX 200 was up 1.98%. It rose 4% from the low on March 20.

Seeing the ASX 200 was up 6.3% in January, the Australian market lost ground in February and March and only the late bounce saved it from a miserable opening quarter for 2023.

Traders in Australia are hopeful of a pause in Reserve Bank of Australia's policy meeting on April 4 as recent economic data suggests the cumulative 3.50% hike since May last year have started to impact growth.

The weak retail sales performance since late last year confirms the slowing trend in consumer spending.

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