Shares fall as benchmark books strongest annual gain in two years

The local benchmark sank in its final session of the year, as investors looked to lock in some profits to cap off a solid December run.

Australian shares sank on the final trading day of 2023 on Friday, but closed the year up 7.8 per cent — the best annual performance since 2021.

The benchmark index, the S & P ASX 200 fell 0.3 per cent, or 23.5 points, to 7,590.8 at the closing bell, ending a two-day rally. The broader All Ordinaries also slipped, falling 0.3 per cent, to 7,829.5.

Markets are pricing in six rate cuts by the US Federal Reserve next year, commencing in March. Picture: AFP /Saul Loeb.

KCM Trade chief market analyst Tim Waterer said the share market had capped off the year with a “pretty unspectacular” session, with profit taking being the order of the day.

“The market has enjoyed a solid run during December with gains over 7 per cent, so investors were looking to lock in some profits ahead of the year end,” Mr Waterer said.

Hopes that the US Federal Reserve and other central banks can successfully cool inflation without causing a major slowdown has caused markets to advance in the past two months.

But with markets pricing in a “glass half full approach”, Mr Waterer said investors could face headwinds next year if central banks didn’t cut interest rates as aggressively as expected.

“Looking ahead to the March quarter next year, if we do see inflation getting sticky, if economic activity picks up a bit … there is certainly a scenario which could play out where the Fed doesn’t cut rates by as much as markets are anticipating,” he said.

“There’s certainly scope heading into next year for some disappointment and a pullback [in markets].”

Nine of 11 industry stocks finished in the red, led by the energy and materials sectors which fell 0.9 per cent and 0.6 per cent, respectively as prices for key commodities slipped.

Brent crude, the global oil benchmark, fell overnight to under $US78 a barrel as cargo ships and oil tankers recommenced transiting through the Red Sea. On the local index, Woodside fell 1.1 per cent to $31.06, Santos slipped 0.9 per cent to $7.60 and Karoon sank 1.5 per cent to $2.03.

Global crude oil prices fell overnight as shipping companies returned to transiting through the Red Sea. Picture: AFP / Christophe Simon

Elsewhere in commodities, iron ore futures on the Singapore exchange rallied 1.2 per cent to $US140.20 a tonne for the January contract. Despite the rise, iron ore miners fell with BHP sinking 0.6 per cent to $50.41 and Rio Tinto losing 0.6 per cent to $135.66.

Gold miners also sank during the session as the spot price for the precious metal dropped to $US2080 an ounce, down 0.2 per cent. Northern Star Resources fell 1.4 per cent to $13.65 while Evolution Mining eased 0.8 per cent to $3.96.

The Australian dollar was higher, buying US68.4c, up 1.5 per cent.

Overnight on Wall Street, the S & P 500 came within four points of surpassing its record high but eased later in trading to close up by just 1.8 points. The broad index is on track to break its longest weekly winning streak in nearly 20 years.

Meanwhile, the tech-heavy Nasdaq fell 4 points and Dow Jones Industrial Average added 0.1 per cent.

In company news, shares in Eagers Automotive sank 1.2 per cent to $14.48 after it left a trading halt. The automotive retailer was hit with a cyber attack earlier this week which prevented the company from finalising transactions for some vehicles, it said in an ASX announcement.