17 Jan 2025
Investors digest busy economic data schedule
Markets
- Local and global stock markets finished higher for the week assisted by favourable US inflation data. In contrast, strong US jobs data earlier in the week hurt equity markets.
- Another volatile week for bond yields with US yields initially rising strongly on a better-than-expected jobs report, but then fell sharply on a weaker-than-expected core inflation reading.
- In local stock news, Star Entertainment Group shares continue to languish with Queensland Premier David Crisafulli rejecting suggestions of a bail out for the casino company. Though shares did jump after reports of a Macau businessman buying a 6.5% stake in the company.
- Insignia Financial (IOOF) shares rose after reports Brookfield was weighing up a bid for the wealth manager. The company had been considering a previous offer from CC Capital Partners which initial suitor Bain Capital has since matched at $4.30 per share.
- Retail stocks came under pressure with both Myer and Premier Group shares falling sharply on reported soft sales in recent months. In contrast, Baby Bunting shares soared after the retailer reported higher sales in the first half with a higher profit margin.
- Rio Tinto reported shipments of iron ore slipped 1% in the December quarter as demand from China remained lacklustre.
Economics
- Australian employment grew by a strong 56,300 in December which follows a downwardly revised increase of 28,200 in November. Part-time employment rose by 80,000 whilst full-time fell by 23,700 in December. The unemployment rate edged higher to 4% with a slight increase in the participation rate.
- The Australian Westpac / MI consumer sentiment survey fell in January which follows a bigger fall in December, with the index remaining in pessimistic territory and below the long-term average. Consumers reported weaker views around family finances and unemployment expectations deteriorated.
- US payrolls expanded by 256,000 in December and the unemployment rate dropped to 4.1%, pushing traders to trim their bets for interest rate cuts in the US down to just one for 2025. The December job gains were well above expectations.
- US inflation rose 0.4% in December bringing the annual figure to 2.9%, both in line with expectations. Core inflation rose to 3.2% for the year, coming in slightly below expectations. Markets liked the result.
- US consumer inflation expectations for the year ahead were unchanged at 3% in December, in line with expectations.
- US producer prices rose in December, coming in below expectations, with the annual growth rate lifting to 3.3%. Core prices were flat with the annual pace steady at 3.5%.
- US retail sales rose 0.4% in December, coming in below expectations.
- A key US small business optimism index rose strongly in December, coming in above expectations.
- The German economy contracted for the second consecutive year in 2024.
- The Bank of Japan deputy governor said board members will discuss a rate hike at their meeting next week as he sees economic developments heading in the right direction but also acknowledged the difficulties in getting their timing right.
- India’s inflation fell to 5.2% in December versus the 5.5% in November and against market expectations of 5.3%, as food prices declined. The December print puts upcoming rate cut expectations at risk, with inflation still well above the central bank’s target of 4%.
- China’s trade surplus soared to a record last year, driven by strong exports that boosted the economy. The surplus jumped to US$992 billion, 21% higher than the previous year, as both foreign companies and Chinese exporters front-loaded orders before likely Trump tariffs. Pleasingly, Chinese imports also showed recovery.
Politics
- Chinese authorities said they will take steps to deal with attacks on their currency, prevent the Yuan from overshooting, and increase market resilience, to ensure the Yuan trades at reasonable levels.
- Reports have indicated that members of US President-elect Trump’s team are discussing phased tariff increases on a month-by-month basis aimed at boosting negotiating leverage while helping to avoid a spike in inflation.
- US President Biden’s administration announced additional restrictions on A.I. chips and technology exports, dividing global markets into three tiers. Nvidia was caught firmly in the crossfire with estimates that up to half of their chips are currently destined for “restricted” markets under these new restrictions.
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