20 Sep 2024
Investors buoyed by large US Fed rate cut
Markets
- Local and global share markets soared higher this week after the US Fed cut rates by more than expected.
- In local stock news, Star Entertainment was given 14 days last Friday to reveal the state of its finances and lay out a rescue plan for its flagship Sydney casino.
- Austal shares soared more than 20% after its US business won a $670 million contract by General Dynamics Electric Boat for work on US Navy submarine components.
- The oil price got a reprieve this week, pushing higher on the back of the US rate cut. Traders are betting rate cuts might spur greater economic activity, and hence demand for oil.
- The Aussie dollar pushed higher this week against a flat US dollar. An interesting move, with flows potentially coming from those selling the Yen.
Economics
- The ABS reported that Australian employment rose by 47,500 jobs in August, much better than the forecast for a 26,000 gain, with unemployment holding steady at 4.2%.
- The US central bank cut interest rates by 0.50% to a range of 4.75-5.00%, the first rate cut in four years, citing greater confidence that inflation is moving back to target. The comments accompanying the decision didn’t really reflect the size of the rate cut.
- US housing starts rose 9.6% in August, whilst building permits lifted 4.9%, both coming in above expectations. Existing home sales fell 2.5% in August.
- US retail sales rose 0.1% in August, coming in above expectations for a small contraction.
- A key US consumer sentiment index rose in September, coming in slightly above expectations. Likely talk of rate cuts assisted here.
- A key US manufacturing index rose strongly in September, coming in well above expectations.
- In a range of other US data, industrial production jumped in August, business inventories lifted in July, and a housing market index rose in September.
- Economic sentiment in Germany dropped sharply in August, showing concerns regarding the country’s economic outlook.
- The Bank of England kept rates steady at 5% after last month’s cut, with inflation holding steady in August but services and wage inflation remaining strong.
- Chinese data showed industrial output marking its longest slowing streak since 2021 last month. Consumption and investment weakened more than expected, while home prices fell at the fastest pace since 2014.
- The Chinese central bank signalled that fighting deflation would become a higher priority and indicated more monetary easing ahead.
Politics
- There was another assassination attempt on former US President Donald Trump’s life, this time while he was golfing at his golf course in Florida. Secret Service agents thwarted the attack.
- Chinese President Xi Jinping called on government officials at all levels to achieve the country’s annual growth target. The order comes as Chinese economic woes continue.
- Russian President Vladimir Putin ordered the size of the Russian army be increased by 180,000 troops to 1.5 million in active service. This would make it the second largest in the world after China’s.
- Lebanese group Hezbollah were dealt a blow after a reported 5,000 pagers and other communication devices were detonated on those holding or wearing them. Israeli intelligence is rumoured to have been behind the attack, with Hezbollah promising to retaliate against Israel.
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