23 Aug 2024
Fed disappoints at Jackson Hole
Markets
- A mixed week for investors with the Fed disappointing US equity markets whilst Australian and European equity markets rose.
- In local stock news, Ampol shares fell after the petrol convenience chain reported a net profit of $235.2 million for the six months to June 30, well up from a year earlier.
- Westpac bank said its unaudited net profit was up six percent to $1.8 billion in the quarter in what their CEO called a solid result. The net interest margin was reasonable and bad debts were lower than expected.
- GPT Group reported a better than expected first half result with guidance in line with expectations. They reconfirmed previous guidance. Office occupancy is better than expected, industrial and retail occupancy remain very strong, with strong income growth from retail.
- Dexus shares fell with the company delivering a result in line with expectations, but lowered guidance. A headline loss was reported due to property revaluations, with revenue up 6.3% on the same time last year.
- Domino’s shares fell as the company reported a drop in its underlying profit for 2023/24 by 1.9% to $120.4 million, admitting they got the first phase of rising inflation wrong but are on the road to recovery, with continued cost and debt reductions. Asia was weak in the period.
- Corporate Travel shares fell on a weak result which included a downgrade to guidance for the 2025 financial year. Revenue was below guidance and market consensus, whilst earnings and net profit also missed.
- Oil prices softened this week on hopes of a Gaza ceasefire and on rising US oil inventories.
Economics
- The RBA’s August board minutes indicate that if data progresses as the RBA expects the cash rate will likely remain on hold until next year. They remain extremely data dependent at this point. Inflation would have to fall sharply, or unemployment rise swiftly, for rate cuts in 2024.
- Australian manufacturing data was released showing output prices had eased, suggesting potentially less pressure on inflation, but business input costs remain elevated putting pressure on margins.
- US central bank members doused market optimism regarding outsized rate cuts at their upcoming meetings, noting a gradual pace of cuts is likely appropriate. Markets rallying whilst pushing very hard for big, outsized rate cuts is an interesting dynamic.
- US employment gains were revised lower by over 800,000 in an annual review to 2.1 million for the twelve months to March 2024. Something fishy going on.
- US retail sales increased 1% in July, well above the 0.3% rise economists had expected.
- A key US leading economic indicator (Conference Board leading index) fell by 0.6% in July, more than economists expected.
- US housing starts fell 6.8% in July, the lowest since May 2020, and below expectations. Building permits slid 4% in the same period. Existing home sales lifted 1.3% in July to a 3.95 million annualised rate.
- A key US consumer sentiment index rose to 67.8 in August, the first increase in five months, and ahead of expectations.
- US manufacturing data from S&P showed a contraction in August whilst the services component rose slightly.
- The European central bank’s July meeting minutes showed policymakers are in no rush to slash rates but rate a cut will be on the table at their September meeting given economic growth concerns.
- British retail sales rose 0.5% in July, coming in slightly below expectations.
Politics
- Current US vice president Kamala Harris has accepted her party’s nomination to lead the Democratic Party into the 2024 election.
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