Crispin Murray: What’s driving Aussie equities this week

Here are the main factors driving the ASX this week, according to Pendal’s head of equities CRISPIN MURRAY. Reported by portfolio specialist Chris Adams

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RISING expectations of a December Fed rate cut have seen a bounce-back in equity markets.

The S&P 500 rose 3.7% last week, led by tech and small caps, and got back to flat for the month.

The S&P/ASX 300 (+2.5%) followed the US back up, despite rising bond yields as higher-than-expected inflation data led the market to give up on domestic rate cuts. It finished 2.6% lower for the month.

Given the Thanksgiving holiday weekend in the US and thin volumes, the rally may be more tied to positioning rather than signalling a resumption of the bull market. However breadth was good, and this is seasonally a positive time of year.

This week will be more telling about the health of the overall market.

At a domestic stock level, we saw takeover bids for National Storage REIT (NSR) and Qube (QUB), highlighting the positive liquidity and risk environment.

BHP also announced it had been in talks again with Anglo American — but could not agree terms and walked away, leaving Anglo to proceed with its merger with Teck Resources.

Australia policy and macro

The domestic economy looks to be in good shape, with business investment and credit growth remaining firm.

However, all this is also driving persistent inflation, which has seen the market remove any expectations for rate cuts.

CPI inflation

The monthly consumer price index (CPI) has been restructured. It now uses 87% of the basket used to measure quarterly CPI, up from 50% previously, which improves its quality as an indicator.

The first release of this updated measure – plus 19 months of back data – showed October headline CPI was higher than expected at 3.8% year-on-year (YoY), up from 3.6% in September.

The roll off of government subsidies for electricity has led to a 37% rise YoY, however these were down 8.2% month-on-month (MoM).

Services inflation rose 0.7% MoM and went from 3.6% to 3.9% YoY. Rents rose 0.4% MoM and 4.2% YoY.

Underlying, trimmed mean inflation was also higher than expected at 0.3% MoM and 3.3% YoY, which is the fourth consecutive month of elevated reading. It is running at 3.6% annualised for the period from August to October, so is getting directionally worse.

The RBA’s challenge is that the stickier components of inflation are getting higher.

• Rents, which have been decelerating, may re-accelerate as advertised rents are above those in the CPI calculation.
• Market services – those provided in competitive environments rather than government regulated areas like education and health – is picking up as a category from 2.7% to 3.3% YoY.
• Meals out and takeaways rose 3.6% YoY, driven by labour and food costs.

This indicates that inflation is set to be above RBA target.

The key question is whether they feel holding rates is sufficient to address this issue, or if rate hikes will be necessary.

The market is currently pricing rates to remain flat in 2026.

Credit growth

Private credit growth remains strong at 7.3% YoY and +7.4% on a 3-month annualised basis in October.

Within it, housing accelerated to 7.6% YoY, business credit to 9.3% YoY and personal lending +4.4% YoY.

Housing investor credit rose to 10.2% on a 3-month annualised basis. This is the strongest since June 2015 and suggests monetary policy is far from being tight. Owner-occupier credit growth rose to 6.4%.

Housing

APRA announced new macroprudential policy starting in February 2026 that limits high debt to income (DTI) loans (of 6x income or more) at 20% share of flow for any lender, applied separately to investor and owner-occupier segments.

This is not expected to act as a constraint to lending but may check some of the more aggressive players at the fringe.

This signal, in combination with no more rate cuts expected, may have a sentimental impact on housing – and there has been an observable decline in auction clearance rates in the last two weeks.

Other data and GDP

Elsewhere, household wealth has grown 7.7% YoY, equivalent to $1.3 trillion, which can help support consumption.

Investment spending also remains firm with private capital expenditure up 6.4% quarter-on-quarter (QoQ) – well above the 0.5% expected.

Within this, investment in non-mining machinery and equipment rose 11.5% QoQ, which was tied to data centre investment.

The Melbourne Institute’s GDP Nowcast is indicating 0.6% QoQ GDP Q3 growth for this week’s upcoming GDP release, implying the annual growth is improving into the 2% range.

So despite the shift in rate expectations, nominal GDP growth could be heading for 6%, which is supportive for company earnings.

US macro and policy

Thanksgiving week was quiet on the data front.

With no attempt to walk back the dovish comments from Vice Chair John Williams, the odds of a cut in December firmed from 71% to 86%.

What data there was came in softer at the margin, with retail sales up 0.2% MoM, and the Conference Board consumer confidence index a bit weaker.

However early indications from credit card companies suggest Black Friday retail sales were good. Mastercard reported +4.1% YoY with e-comm +10.4% and in-store sales +1.7%. Apparel was good at +5.7% YoY.

UK macro and policy

The combination of more optimistic growth forecasts and the prospect of a shift to T-Bill issuance of up to 20% of funding needs means the requirement on the longer end of the bond curve is diminished and has seen yields on the long end of the UK sovereign bond curve fall.

However, the underlying situation services as a reminder of the challenges that can face an economy when it gets into the spiral of a worsening fiscal position, which requires higher taxes, leading to lower growth, which again requires more tax hikes.

The UK government has announced the extension of the existing freeze of income tax thresholds until FY31. This defers some of the impact but ultimately sees more taxpayers dragged into higher thresholds over time.

The UK government has announced the extension of the existing freeze of income tax thresholds until FY31. This defers some of the impact but ultimately sees more taxpayers dragged into higher thresholds over time.

This approach seems set to drive tax as a share of GDP back up to levels not seen since 1948.

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Markets

We did see markets begin to bounce back in a quiet week, but it is hard to read too much into this given it may reflect a reduction in position sizes going into an illiquid long weekend in the US.

There were some constructive moves, with better breadth in the US equities.

Also, despite all the focus on rising credit default swap spreads for some AI-linked borrowers such as Oracle, the overall credit spread environment is still benign.

Australia

The S&P/ASX 300 ended November with a decent counter-trend rally, despite rising bond yields on stronger inflation data.

It ended down 2.8% for the month, led down by tech (-10.8%) and banks (-7.0%).

Metals and mining (+1.6%), healthcare (+1.7%) and consumer staples (+1.4%) were the best performers in November.

There remains a high level of volatility driven by single stock events, while index-level volatility remains muted.

Technology’s decline in November reflected a combination of poor reaction to results and updates from Xero (XRO, -16.0%), Life360 (360, -18.8%) and Technology One (TNE, -18.4%), coupled with continued concerns over the impact of AI on software and platform companies and questions around whether AI is a bubble set to burst. It was exacerbated as growth managers were forced to cut risk given the high correlation of performance.

It is unusual for such a de-rate in technology at a time when the economic outlook looks benign and rates and bond yields are stable to down. This suggests it is the unknown structural factors, combined with positioning, which has driven pricing.

Banks performed reasonably well post results, however they began to underperform post the Commonwealth Bank (CBA, -11.2%) quarterly release highlighting competitive concerns.

November’s best performing stocks tended to be under-owned names which have previously struggled e.g. Light & Wonder (LNW, +39.8%), HMC Capital (HMC, +24.8%), Nufarm (NUF, +20.2%), Domino’s Pizza (DMP, +16.7%), Myer (MYR, +16.5%), and Viva Energy (VEA, +15.5%) in addition to the lithium and gold stocks.

About Crispin Murray and the Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

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