17 Nov 2023
Equities rocket higher on flat US inflation
Markets
- Local and global equity markets rose this week with investors buoyed by the weaker than expected US inflation print.
- In local stock news, ResMed announced a restructuring of its leadership team, with several new roles added and the retirement of their current president and chief operating officer.
- Mineral Resources shares fell after the company paid $60 million plus royalties to secure lithium, nickel, copper, and cobalt rights to the Pantoro Norseman gold project in WA.
- TPG Telecom shares fell sharply to a five-month low after ending discussions with Vocus Group on a $6.3 billion sale of its non-mobile fibre assets, with the parties unable to reach agreement on the operating model and commercial terms for TPG.
- ANZ Bank posted a cash profit of $7.4 billion for the 2023 fiscal year, up 14% from 2021/22 but 1.5% below consensus expectations. Net interest margins were weak, with the bank going hard to gain market share via more attractive rates, which worked.
- Aristocrat Leisure shares fell after the poker machine manufacturer announced it made $1.3 billion in profit for the twelve months to September 30, up 13% from the previous year.
- Oil prices fell for a fourth straight week as demand concerns weighed and US crude stockpiles rose. OPEC said that oil market fundamentals remained strong and blamed speculators for a drop in prices.
- The Australian dollar jumped higher as the US dollar fell following the weaker than expected US inflation print for October.
Economics
- Australian wages rose by 1.3% in the September quarter, bringing the annual rate up to 4%, with the pace of annual growth the strongest since March 2009. Private sector wages growth was 4.2% whilst public sector was 3.5%. The lift to minimum and award wages drove the result.
- The ABS reported the Australian economy added 55,000 jobs last month, driven by a 37,900 increase in part-time employment and more than double the 24,000 expected. Unemployment did move higher slightly to 3.7% and growth in hours worked slowed further.
- A speech from a key RBA member stated Australia’s inflation rate is still too high and the next stage in bringing it back down to target is likely to take longer than the first phase.
- A key Australian consumer confidence index showed the RBA’s rate hike last month pushed consumers back to feeling deeply pessimistic, unwinding a small boost in confidence the month before.
- US October inflation came in below expectations, a flat reading of 0%, with the headline number declining to 3.2%. Expectations were that inflation would fall to 3.3% year on year, from 3.7% in September. But the core inflation (ex. food and energy) reading rose by 0.2% in October, with annual core inflation easing from 4.1% to 4%.
- The US central bank chair stated he wasn’t confident the bank had hiked rates enough to tame inflation, and more increases might be appropriate.
- US retail sales fell by 0.1% in October, coming in better than expectations, with prior months revised higher.
- US producer prices fell 0.5% in October, coming in well below expectations, which resulted in the annual growth rate easing from 2.2% to 1.3%. Core producer prices (ex. food and energy) were up 0.1% in October, with annual prices falling slightly to 2.9%.
- US business inventories rose whilst a key manufacturing index rose into positive territory, coming in well above expectations.
- A key survey showed weak US consumer sentiment and higher inflation expectations, with the latter rising for a second consecutive month to a seven-month high of 4.4%. Another data set showed consumer inflation expectations easing for the year ahead to 3.6% in October.
- UK annual consumer price inflation fell to 4.6% in October from 6.7% in September, coming in slightly below expectations.
- Japan’s economic growth contracted in the September quarter, snapping two consecutive quarters of growth, with soft consumption and export data the culprits.
- Chinese consumer spending was better than expected in October, with the Chinese authorities also pumping the most cash into the financial system since late 2016 through one-year policy loans.
- The Chinese central bank offered US$200 billion of cash through its medium-term lending facility, significantly more than the amount coming due in November and above expectations. It has also been rumoured US$137 billion in low-cost financing will be made available to affordable housing programs.
Politics
- The US government averted yet another government shutdown, following the continuing resolution put in place 45 days ago, with the House of Representatives voting to keep the government funded until early next year.
- Chinese President Xi visited the US, meeting with President Biden, along with leaders of key large US companies.
- Australia will scrap more than fifty road and rail projects across the country with officials wanting to prevent the infrastructure pipeline from spiralling out of control and keep a lid on inflation.
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