2 Aug 2024
Inflation data gives RBA a reprieve
Markets
- Local and global markets were mixed this week. Australian and Asian markets moved higher early in the week, buoyed by Australian inflation data and potential Chinese stimulus, whilst other global markets grew concerned about weaker economic data.
- In local stock news, Mineral Resources reported a solid period of production while reaffirming their financial year guidance, with net debt better than expected as was the price they realised on commodity sales (iron ore, lithium).
- Health insurer NIB announced managing director and chief executive Mark Fitzgibbon will retire on 1 September, after 22 years in the role.
- ResMed came under some selling pressure this week, caught up in the news that the shares of a US listed blood sugar device maker used in type 1 & 2 diabetes fell 40%.
- Fortescue shares fell sharply to a 20-month low after an institutional investor rumoured to be US-based Capital Group offloaded $1.9 billion in shares.
- Woolworths’ managing director for supermarkets is leaving to become the chief executive of Ramsay Health Care, replacing Craig McNally who will retire in June 2025 after eights years in the role. Shares in both companies fell on the announcement.
- Rio Tinto’s first half underlying profit edged higher, with the company reporting underlying earnings of $5.8 billion in the half year to June 30, up 1.8% from the year before. Iron ore prices fell in the period.
- The Australian dollar saw a little weakness this week as a lower-than-expected Australian inflation print dowsed calls for a rate hike.
Economics
- Hotly anticipated Australian inflation data was released with the RBA’s preferred trimmed mean measure rising by 0.8% in the quarter, in line with their forecast but below the market estimate of 1%. Headline inflation rose by 1% in the quarter. The data takes pressure off the RBA to potentially hike rates at its August meeting.
- Australian retail spending remains weak with inflation adjusted retail trade falling by 0.3% in the June quarter. Private sector credit rose by 0.6% in June to be 5.6% higher through the year.
- The Australian goods trade balance printed higher in June, up from May. Net exports are expected to contribute to June quarter economic growth. Goods export prices fell 5.9% in the quarter whilst import prices rose by 1%.
- Australian home price growth was unchanged at 0.5% in July, following the revision downward of June’s data from 0.7% growth.
- Australian building approvals fell by 6.5% to 13,237 in June 2024. Multi-unit dwellings drove most of the fall, down 19.7% in the month.
- The US central bank left rates unchanged as widely expected, but the chairman noted that the committee considered cutting rates. Comments that potentially pave the path for a September rate cut.
- A key US private payroll report showed jobs rose by 122,000 in July, coming in well below expectations.
- US personal income lifted 0.2% in June, coming in below expectations, whilst spending rose by 0.3%.
- A key US consumer sentiment index fell from 68.2 in June to an eight-month low of 66.4 in July, coming in slightly weaker than expectations. In contrast, a key consumer confidence index rose from 97.8 in June to 100.3 in July, coming in slightly above expectations.
- US job openings fell in June to 8.18 million but came in above expectations.
- A key US manufacturing index fell in July, coming in below expectations and remaining in contractionary territory. Construction spending fell whilst productivity rose, and unit labour costs were up.
- Two key US house price indices showed flat to slightly higher prices in May. Pending home sales lifted 4.8% in June.
- The Bank of England lowered interest rates for the first time since 2020, in a 5-4 vote in favour of a rate cut.
- Germany’s economic growth contracted by 0.1% in the June quarter, coming in below expectations.
- The Bank of Japan raised its interest rate and unveiled plans to reduce bond buying (money printing) as it tries to normalise policy. The policy rate increased to 0.25% from a range of 0-0.1%. The move was mostly unexpected.
- China launched a trade-in subsidy program for home appliances and cars in order to boost consumption. This comes as the Chinese Communist Party pledged to make boosting consumer spending a greater policy focus.
- A key Chinese data point showed their factory activity fell into contractionary territory for the first time in nine months in July.
Politics
- A Hamas political leader was assassinated in Iran’s capital, ratcheting up tension in the Middle East. The news came after an earlier rocket strike in the Israeli-occupied Golan Heights which was followed by Israel carrying out a strike in Lebanon targeting a Hezbollah commander.
- The US is considering unilateral restrictions on China’s access to AI memory chips and equipment capable of making those semiconductors as soon as next month, with the measure designed to stop US and South Korean leading memory chipmakers from supplying Chinese firms.
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