20 Jan 2023
Divergent week for equity markets
Markets
- Local and global equity markets had a divergent week with US and European equity markets falling whilst the Australian markets rose.
- In local stock news, Super Retail Group shares rose strongly to a near one-year high after the retailer reported strong first-half trading, the same-store sales up 11%.
- Private equity operator Bain Capital said it is looking to relist airline Virgin Australia, obviously looking to take advantage of the strong bounce back in air travel.
- JB Hi-Fi shares rose strongly after announcing record sales in the six months to the end of December. The CEO said easing covid pressures and disruptions had contributed to improved margins with solid customer demand driving volumes.
- Rio Tinto released fourth quarter production numbers which were broadly in line with guidance. The company also provided 2023 guidance which came in largely as expected.
- Ampol shares rose after the petrol station owner announced that its Lytton refiner margin was still above historical levels in the December quarter.
- Viva Energy rose strongly after the Shell petrol station licensee announced fuel sales were up 12.9% in the December quarter compared to the same time last year.
Economics
- Australian consumer sentiment rose strongly in January, no doubt helped by no central bank meeting. Despite the rise, consumers remain pessimistic. Forward looking components of the survey were stronger than current conditions whilst sentiment for mortgage holders rose more than for renters.
- Australian employment fell by 14,600 in December, coming in below expectations, with the unemployment rate holding steady at 3.5% and the participation rate falling. Full-time employment outpaced part-time. Employment growth is slowing and is expected to continue to slow in 2023.
- The return of net overseas migration continued in November with a lift in permanent and long-term arrivals. Whilst the tourism sector is seeing a steady return of short-term overseas arrivals, numbers remain well below pre-covid levels.
- US retail sales fell 1.1% in December, with higher interest rates and inflation hurting spending on vehicles, fuel, and furniture.
- US wholesale price inflation fell to its slowest pace since March 2021, whilst industrial production fell in December and business inventories rose in November.
- A key US consumer sentiment index rose to its highest level since April 2022, coming in well above expectations. Expectations for inflation one year from now also edged down.
- A US consumer price index report showed inflation dropped in December to its lowest level in more than a year. Consumer prices rose 6.5% in the past 12 months, and whilst somewhat abating, remain at very high levels.
- US export prices fell by 2.6% in December, well below forecasts, whilst import prices rose by 0.4% coming in higher than expected.
- The New York State Empire manufacturing index fell sharply in January to the lowest level since May 2020, whilst the Philadelphia Fed manufacturing index rose in January but remains in contraction.
- The UK labour market remains tight with the unemployment rate steady at 3.7% for another month, with average earnings rising 6.4% versus the same time last year.
- A German economic sentiment index rose strongly in January into positive territory, coming in well above expectations, and possibly pointing to a milder German recession than initially feared.
- China’s economy went sideways in the fourth quarter resulting in full year growth of 3%, the second slowest pace since the 1970s. However, the fourth quarter result was better than expected and improving December data added to optimism the economy may be primed for a recovery.
- Japanese producer price inflation soared last month to 10.2% on the same time last year, coming in well ahead of economist forecasts. In contrast, German prices ticked down on the previous month for a third straight month, but prices still rose 12.8% on the same time last year.
- The Bank of Japan left interest rates unchanged, confusing some that thought it would move rates higher to match recently changed policy on their yield curve control.
- Japan’s export growth slowed sharply in December as exports to China fell for the first time in seven months.
Politics
- NZ PM Jacinda Ardern announced she is stepping down from the leadership ahead of a general election called for 14 October, saying she no longer has “enough in the tank” to seek a third term in office. Interesting move.
- US President Biden’s public approval rating was close to the lowest level of his leadership as a scandal involving classified documents found in his home and other locations continues to gather pace.
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