31 May 2024
Equity investors cautious on weak data
Markets
- Local and global equity markets weakened this week as equity investors finally took notice of the risks associated with a weaker economic path ahead.
- In local news, Lendlease shares rose strongly after the company announced more divestments, this time selling its international operations, with plans to return capital to shareholders and concentrate on the Australian market.
- Uranium process Boss Energy fell sharply after the company announced three company insiders including the CEO and the chairman had sold a significant portion of their shareholdings.
- BHP asked for more time to negotiate with target Anglo American over its $74 billion bid. But Anglo said it wouldn’t give any more time and its biggest concerns had still not been met. No deal for now, but BHP might have another go in six months’ time.
- Fisher & Paykel shares rose after the NZ-based respiratory products company said it had grown revenue by 10% to $1.6 billion in the twelve months to March 31.
Economics
- The Australian monthly inflation indicator ticked up to 3.6% for the year in April, consistent with the March quarter print. The monthly pace did tick down though, coming in slower than the pace over previous months. The largest contributors were housing, food, alcohol, and transport.
- Australian retail trade rose by just 0.1% in April after falling by 0.4% in March, with annual growth sitting at 1.3%. Food retailing and clothing & footwear were the hardest hit. Households increasingly favouring saving over spending.
- Australian construction work done fell by 2.9% in the first quarter but remains 1.8% higher through the year. Building work done was 3.7% lower, with hits to both residential and non-residential work. Engineering work done fell 2.1%.
- Australian building approvals fell by 0.3% to remain near decade lows. Private sector houses were 1.6% lower while multi-unit dwellings were 1.1% lower.
- The total volume of capital expenditure in Australia rose by 1% in the March quarter. Mining investment fell by 4.7% while non-mining investment rose by 3.3%.
- The US central bank said the US economy has expanded at a slight or modest pace across most regions since early April, according to its survey of regional business contacts. This was confirmed with 1.3% annualised economic growth for the March quarter, growing at a slower pace than initially reported, with personal spending advancing at a slower pace.
- A US central bank official said they haven’t ruled out additional interest rate hikes, but he did concede an increase was unlikely.
- Data from a key US survey showed expectations for inflation edged up from a month earlier, remaining above average versus the pre-covid period.
- A US gauge of business activity came in much stronger than expected, relative to the slight softening that was expected, to hit the highest level since April 2022.
- US consumer sentiment fell in May, but still came in stronger than expected. In contrast, a consumer confidence index rose in April, coming in well above expectations. Pending home sales fell 7.7% in April.
- A European central bank survey showed Eurozone consumer expectations for inflation in the next twelve months eased to 2.9% in April, from 3% a month earlier, to hit the lowest level since September 2021.
- The German economy grew by 0.2% in the March quarter, in-line with expectations.
- German inflation increased slightly more than expected to 2.8% in May from 2.4% in April.
- British retail sales fell 2.3% in April, coming in well below the slight weakness that was expected.
Politics
- Former US President and current Republican nominee for the 2024 election, Donald Trump, is now the first former President to be convicted of a crime with a New York trail jury finding him guilty on all thirty-four counts. The charges potentially carry as much as four years in prison. Trump will appeal the decision.
- French President Emmanuel Macron called on the European Union to stop being naïve in the face of growing competition from the US and China. He repeated calls for a “buy European” strategy in key sectors such as defence.
- Australia and the European Union have a struck an agreement to boost cooperation and investment in critical minerals, as the West looks to reduce their reliance on China for these materials.
- China is relaxing curbs on Australian beef exports, with five major beef producers previously banned from exporting now able to resume trade immediately.
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