27 Sep 2024
China stimulus boosts investor sentiment
Markets
- Local and global equity markets rose this week boosted by Chinese stimulus measures.
- In local stock news, the Australian competition regulator announced legal action against Coles and Woolworths, claiming both had mislead consumers about its discounting practices.
- Rio Tinto’s chair said the world needs more mines to cope with rising demand for key metals like copper, as mergers and acquisitions alone won’t plug a likely supply gap.
- The decline in uranium stocks was arrested after a US energy giant signed a 20-year power purchase agreement with Microsoft which will restart the Three Mile Island nuclear power plant shut-down in 2019.
- Aristocrat Leisure got some good news with a US judge granting the company a preliminary injunction related to competitor Light & Wonder’s Dragon Train Slot game.
- Iron ore prices arrested their decline, supported by Chinese stimulus measures to boost growth and shore up its property sector.
- The gold price continues to make new highs, supported by rate cuts and a falling US dollar making the shiny metal more appealing to foreign investors.
- The Australian dollar pushed higher with traders buoyed by Chinese stimulus measures which helped support risk-on sentiment and commodity prices.
- Oil prices fell on the weak demand outlook for 2025 and rumours that OPEC+ members may be willing to sacrifice prices in the short-term to regain market share.
Economics
- The RBA left rates on hold at 4.35% at their September meeting with a slightly softer tone (i.e. less hawkish) on rates and inflation, whilst clarifying they expect underlying inflation to be within the target band in 2026.
- Australian headline inflation fell by 0.2% in August to bring the annual inflation rate to 2.7%, back within the RBA’s 2-3% target band. The data was helped by a temporary large fall in electricity prices. All measures of underlying inflation eased, with the RBA more focused here, given this remains above its target.
- Australian job vacancies declined by 5.2% over the three months to August, to be 32% below its peak levels in 2022. Labour demand is clearly cooling, with upward pressure on unemployment to come.
- The US economy expanded at a 3% annualised pace in the June quarter, coming in above expectations. This makes the recent 0.50% rate cut from the Fed all the more confusing.
- Several US central bank officials spoke with consensus that further rate cuts are needed, but that the pace would be dictated by incoming data.
- A key US consumer confidence index fell sharply in September, coming in well below expectations, and was the largest fall in three years.
- A key US manufacturing survey continued to show mixed fortunes with a contracting manufacturing sector and a resilient services sector. The manufacturing component fell to a fifteenth month low.
- US new home sales fell 4.7% in August to a 716,000 annualised rate, slightly above expectations.
- The Bank of Japan held rates steady with comments from the governor indicating there is unlikely to be another rate increase this year.
- Data showed Japan’s inflation gauge had accelerated in August for the fourth consecutive month.
- British retail sales rose by a stronger than expected 1% in August. Expectations were for a 0.4% rise.
- UK consumer confidence crashed in September by the most in more than two years. The data comes with dire warnings from the new Labor government about “tough decisions” needed to fix government finances.
- The Chinese central bank unleashed a wave of policy support lowering a key interest rate on bank deposits and cutting the amount of money banks must hold in reserve to the lowest level since 2020, in order to help banks boost lending. It also lowered existing mortgage rates and even allowed brokers and funds to borrow cash from the central bank to buy stocks.
Politics
- Australian Prime Minister Anthony Albanese said he expects to conclude an agreement with the US over critical minerals before the end of the year.
- Australia approved the expansion of three coal mines, sparking criticism about the government’s efforts to keep emissions in check.
- NZ’s government is imposing new work-from-home guidance on public servants to get them back to the office each day and arrest the significant decline in spending in the largest cities.
- Fighting between Israel and Lebanon’s Hezbollah intensified with the US and allies calling for a 21-day ceasefire from both sides. Israeli officials have rejected the proposal.
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