9 Aug 2024
Investors fret on Yen moves and US jobs data
Markets
- An interesting week for both local and global equity markets with plenty of fear early on which then abated as the week went on.
- Wall Street’s “fear gauge” or the volatility index (VIX) as it’s known in investment circles rose sharply, registering its biggest spike since 1990. The move came off an extremely low base.
- Global bonds rallied strongly (i.e. yields lower, prices higher) early in the week as traders bet the US Fed and other central banks will turn more aggressive in cutting interest rates. A big change in expectations versus just a couple of weeks ago.
- In local stock news, ResMed shares fell after the sleep apnoea device manufacturer reported June quarter revenue grew 9% to US$1.22 billion. The company’s CEO dismissed fears a new generation of weight-loss drugs would undercut demand for ResMed’s products.
- Woodside shares fell amid reports the proposed $30 billion plus Browse development off Western Australia failed to get state environmental approval. Shares came under further pressure after the company announced it would acquire a green carbon ammonia project in Texas for US$2.3 billion.
- The Australian big-4 banks saw strong share price falls earlier in the week as part of the broader stock market sell-off. All four had been up very strongly calendar year to date.
- BHP is apparently planning to sell the Brazilian copper and gold assets it acquired with the takeover of Oz Minerals.
- Dexus shares rose after Australia’s biggest office landlord benefited from the changed rhetoric of the NSW Premier pushing for all government employees to return to the office. Ghost-town CBDs and productivity the likely driver.
- Toll operator Transurban forecast it would increase its dividend by 5% this financial year, after growing its 2023/24 operating earnings by 7.5% to $2.6 billion (slightly below market expectations).
- US crude oil supplies fell for a sixth week in a row, dropping by 3.7 million barrels last week, significantly above analyst expectations for a 700,000-barrel drop, putting upward pressure on the oil price.
- The Aussie dollar strengthened a little against the US dollar on the back of a rather hawkish statement from the RBA, while all the focus was on the surge in the Japanese Yen earlier in the week as traders and hedge fund managers were forced to buy more to cover their losses.
Economics
- The RBA kept the cash rate unchanged at its August meeting, with a stark change in the tone of the statement accompanying the decision. Interestingly, the statement read as if a rate increase was warranted, but the RBA instead chose to douse any calls for rate cuts in 2024.
- A key US services sector activity index rose to 51.4 in July, from 48.8 in June, moving back into expansionary territory. The June reading was the lowest since the depths of the covid period.
- Warm weather has helped UK retail sales return to modest growth in July as shoppers splashed out on clothes and health & beauty products. UK retail sales rose 0.5% on the same time last year in July, an improvement from the decline in June.
- The Bank of Japan governor said the central bank would not raise rates when financial markets are unstable, with his comments resulting in the Yen pushing lower and boosting market sentiment.
- China’s exports grew at their slowest pace in three months in July, missing expectations and adding to concerns about the outlook for their manufacturing sector.
Politics
- Uranium explorers are calling on Australian state governments to lift bans on mining the fuel. Australia boasts nearly a third of known uranium ore deposits worldwide, with SA and NT the only states that allow it to be mined.
- Australia has raised the nation’s terrorism threat level for the first time since 2015. PM Albanese said the likelihood of an attack on Australian soil was now “probable” instead of “possible”.
- US Vice President Kamala Harris selected Minnesota Governor Tim Walz as her running mate in the 2024 election.
- Social unrest continued this week in the UK and Venezuela, while the Bangladesh PM has resigned and reportedly left the country as it experienced some of the worst violence since it was founded.
- Following the assassination in Iran of a Hamas political leader, Hamas has selected a replacement who is reported to be more of a hardliner. This does not bode well for any potential cease-fire agreement.
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