13 Sep 2024
Investors buoyed by likely US rate cut next week
Markets
- Local and global markets mostly moved higher this week as data all but confirmed a US rate cut next week.
- The banking regulator APRA has proposed Australian banks scrap the use of AT1 hybrid securities in capital requirements, potentially becoming the first jurisdiction to do so. If legislated, the new rules would come into effect in 2032.
- In local stock news, Westpac bank named their current business and wealth division head Anthony Miller as its next CEO, succeeding the retiring Peter King from December 16. Miller has been with the bank since 2020, whilst King has been there for 30 years.
- Vocus, co-owned by Aware Super and Macquarie, is in advanced talks to buy TPG Telecom’s fibre assets. The deal could happen as soon as the next few weeks.
- Steadfast shares fell sharply before being placed in a trading halt with the insurance broker wanting more time to respond to a story aired by ABC’s Four Corners alleging kickbacks to strata management firms for purchasing its policies. The company subsequently rejected the allegations.
- NextDC shares fell after the data centre operator completed a $550 million placement at $17.15 per share to acquire more data centres in Asia.
- Mineral Resources got some positive news with the Foreign Investor Review Board approving the sale of 49% of the Onslow Iron haul road which will give them $1.1 billion in cash in the next 15 days, taking some near-term pressure off the balance sheet. The stock price also received support following reports that a Chinese company had suspended two lithium mines in China, thus taking excess supply out of the market.
- Oil prices continued to weaken early in the week with OPEC+ saying world oil demand would rise by 2.03 million barrels per day in 2024, well down from last month’s forecast for growth of 2.11. However, the price recovered somewhat during the week on concerns of supply disruptions from tropical storms in the US Gulf.
Economics
- The RBA’s assistant governor said while Australia’s labour market had cooled it was still too tight. No sign of rate cuts whilst that’s the case.
- National Australia Bank’s monthly business survey showed conditions dropped back below average in August after a brief uptick in July, with confidence sinking into negative territory. Conditions printed at its lowest level since January 2022, with the employment component dropping noticeably and forward orders are weak.
- A key Australian consumer index found Australians are still pessimistic about the economy. Cost of living pressures have become a less prominent concern as consumers grow more concerned about where the economy is headed and what that might mean for jobs.
- Australian new housing lending rose by a large 3.9% in July driven by a 5.4% lift for investors.
- Real consumer spending (net of inflation) contracted in the June quarter to be just 0.5% higher through the year, which is comfortably below RBA’s forecast of 1.1%. Real consumer spending per person has fallen over the last eighteen months, driven by a decline in discretionary spending.
- The August US jobs report showed slower than expected jobs growth even as the unemployment rate ticked down as expected. Average hourly earnings grew 0.4% in August to be 3.8% higher on a year ago.
- US inflation printed in line with expectations, but core inflation was a touch stronger than expected, which likely rules out an outsized 0.50% rate cut at the Fed’s September meeting. The annual inflation rate fell to its lowest since February 2021.
- US consumer inflation expectations for the year ahead were unchanged at 3% in August.
- Total consumer US credit grew by US$25.5 billion in July, the most since November 2022, and well above expectations for a US$10.4 billion expansion. Either consumers are suddenly very confident about the forward period or they’re desperately borrowing for everyday needs.
- A key US small business optimism index fell in August, coming in below expectations.
- The European Central Bank lowered its interest rate by 0.25% to 3.50% in a widely telegraphed move, but remained tight-lipped on future policy moves.
- Britain’s economy stagnated for a second month running in July.
Politics
- Australian Treasurer Jim Chalmers said he would prefer to negotiate with the minority Greens party than abandon his proposed changes to the RBA, which have yet to gain the necessary support from the Coalition. We’re not sure the changes proposed are necessarily the changes required.
- The chief of Australia’s minerals council wants the nation to resolve issues linked to how environmental permits are obtained, saying the approvals process must be sorted out. The statement follows the debacle in NSW where a mine was approved by the NSW state Labor government only then to be declined by the Federal Government.
- US presidential hopefuls Donald Trump and Kamala Harris sparred through their first debate. Trump put on a usual and consistent show whilst Harris surprised most with a better-than-expected performance. Betting agencies had her winning the debate.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
