10 Nov 2023
Fed chair nixes rate cut optimism
Markets
- Local and global equity markets were mixed this week, with support earlier in the week drowned out by hawkish comments from the chair of the US central bank.
- In local stock news, Treasury Wine Estates shares fell to a 3-month low as the company completed its $604 million institutional capital raising to help fund its $1.6 billion acquisition of Californian winemaker DAOU Vineyards.
- Westpac lifted its dividend and said it will buy-back $1.5 billion of its own shares. Net income rose 26% in the twelve months to September 30 to $7.2 billion, missing analyst expectations, whilst the second half dividend came in ahead of expectations. The result was buoyed by strength in mortgages, with margins improving and costs heading in the right direction.
- Mineral Resources has joined the battle for small lithium miner Azure Minerals, following Chilean lithium giant SQM’s $1.6 billion takeover approach. Mineral Resources, with a 12% stake, now joins Gina Rinehart who previously took an 18% stake in order to scupper the deal.
- Macquarie Group reported a softer than expected first half result driven by weaker performance from Macquarie Asset Management. Net profit was $1.42 billion with an interim dividend declared of $2.55 per share. Overall guidance was reasonable, with a buy-back of up to $2 billion announced.
- Origin Energy’s largest shareholder, Australian Super, boosted its stake in the company to 15.03%. The move comes after Australian Super declined the latest bid for Origin by private equity firms, which had stated their last bid was their “best and final offer”. In the absence, of Australian Super launching its own bid, the consortium may launch an off-market takeover offer instead.
- James Hardie Industries shares soared to an almost two-year high as the company announced a record first-half operating cash flow of $714 million, up 74% from a year ago.
- Breville Group shares rose after their CEO told its annual general meeting the small kitchen appliance maker was, so far, tracking between its low-end and high-end goal posts for 2023/24.
- The Rio Tinto CEO, whilst travelling through China, has said infrastructure projects are still happening and the automotive sector remains very strong, offsetting challenges in the property sector with steel production up 4.4% in the twelve months to the end of September.
- Global oil prices fell to their lowest levels since July on Chinese demand concerns. Prices also weren’t helped by the US energy administration now expecting total US petroleum consumption to fall by 300,000 barrels per day this year, reversing its previous forecast of 100,000 barrels per day increase.
- The Aussie dollar fell against the US dollar following the US central bank chair’s hawkish comments which saw the US dollar strengthen.
Economics
- The RBA lifted the cash rate by 0.25% to 4.35% at its November meeting. The move was largely expected given recent economic data releases showed greater economic resiliency and inflation falling at a slower pace than previously.
- Australia’s service sector contracted moderately in October according to a key index.
- US Fed chair Jerome Powell noted the rate setting committee are not confident policy rates are high enough to achieve the 2% target and the committee won’t hesitate to tighten more if appropriate.
- US employers added 150,000 jobs in October according to the Labor Department, coming in at half of September’s gain and below expectations. The unemployment rate rose to 3.9% and wage growth eased.
- The Bank of England left rates on hold at their most recent meeting with the bank’s chief economist putting rate cuts in 2024 on the table.
- China slid back into deflation in October, with consumer prices falling 0.2% last month after being near-zero in the previous two months. Producer prices fell for the thirteenth straight month dropping 2.6%.
Politics
- Prime Minister Anthony Albanese became the first Australian leader in more than seven years to meet with Chinese President Xi in Beijing in trying to warm relations between the two countries.
- China Mineral Resources Group, the new state-run Chinese agency set up to coordinate China’s iron ore purchases, said iron ore prices had reached “unreasonable” levels and were hurting Chinese steel mills.
- Chinese authorities have asked Ping An Insurance Group, one of the world’s biggest insurers, to take a controlling stake in Country Garden, the nation’s biggest private property developer, people familiar with the plan said. Looks like authorities have had enough.
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