27 Jan 2023
Equities higher on solid economic data
Markets
- Local and global equity markets pushed higher this week as US and European economic data came in better than expected.
- In local stock news, Whitehaven Coal said it expects to announce its first-half earnings had more than quadrupled to around $2.6 billion on soaring coal prices.
- Diversified miner South32 shares rose after the company posted a 24% increase in its second quarter metallurgical coal output. Second quarter production was strong with production up across all segments and costs coming in at the low end of guidance.
- Fisher & Paykel Healthcare rose strongly to a 10-month high after the respiratory products company said it expects to make as much as NZ$1.6 billion in revenue for the financial year ending March 31.
- Qantas has had a bad run of safety issues over the last couple of weeks with an engine shutdown on one plane enroute to Sydney from Auckland and at least four other aircrafts reporting issues with wing flaps, warning indicator lights or fumes in the cabin.
- Perpetual completed the acquisition of Pendal with shares delisted and cash and Perpetual stock delivered to Pendal shareholders.
- The Aussie dollar pushed higher this week buoyed by the stronger than expected Australian inflation print which may put further pressure on the RBA to tighten policy.
Economics
- Australian headline inflation rose by a large 1.9% in the December quarter pushing the annual rate to 7.8%. Underlying inflation lifted to 6.9%, putting pressure on the RBA to continue raising rates early this year. Domestic holiday travel and accommodation surged by 13% in the quarter and the international equivalent jumped by 7.6%. Rising electricity prices was the other big contributor. Goods inflation continues to account for the bulk of the rise in inflation, but rising services inflation is more worrying for the RBA.
- Australian business conditions fell in December and now sit at the lowest point since January 2022. Falls came from trading conditions, profitability, and employment. Business confidence rose a little but remains below long-term average levels, as business confidence and consumer confidence begin to converge.
- US existing home sales plunged to a 12-year low in December. This marks the 11th straight monthly decline in sales, the longest stretch since 1999. A report from the US National Association of Realtors showed the median house price increasing at the slowest pace since early 2020 as sellers resorted to offering discounts.
- Data showed that US economic growth slowed less than expected in the December quarter. Consumer spending remained solid, but its pace of growth has slowed. Business investment ticked up at a weaker rate and the housing market continued to weaken. Other contributors included businesses adding to inventories, higher government spending, and lower imports.
- A composite reading of US economic activity rose in January, with both manufacturing and services components rising, coming in above expectations.
- Eurozone consumer confidence improved in January from December, the highest reading since February 2022 on hopes of lower energy prices. However, confidence remains deeply in negative territory.
- Eurozone economic activity surprisingly rose in January, potentially putting further pressure on the European central bank to lift rates in response to an economy that is holding up better than expected whilst inflation remains very high.
- The UK National Association of Realtors has said that 2022 sales of previously owned homes fell to their lowest level since 2014.
- UK retail sales fell in December, coming in below expectations for an increase. Sales volumes were also down compared to a year ago, with the largest decline since 1997.
- ANZ have said that the number of scheduled domestic flights in China is set to climb by more than 40% in late January. Other data shows a pick-up in China travel with road traffic congestion in the country’s fifteen key cities up 22% this month from a year ago.
Politics
- The US debt ceiling debate continues in US politics with President Biden vowing to veto any debt ceiling extension that includes provision for future controls/reductions in spending, whilst the Republican-controlled house won’t extend the debt ceiling without those provisions. Fiscal responsibility must count for something at some point.
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