26 May 2023
Investors nervy with US debt ceiling unresolved
Markets
- Local and global equity markets fell this week as concerns remained regarding the US debt ceiling.
- US based chip maker Nvidia Corp’s shares soared 24% after its sales forecast for the three months ending in July came in more than 50% ahead of consensus. It’s the biggest one-day gain in market capitalisation ever for a US stock, adding US$184 billion.
- In local stock news, shipbuilder Austal announced a big contract win with the US navy to design a patrol boat with the opportunity to build seven boats for US$3.2 billion.
- Qantas are taking on another four aircraft under their lease agreement with Alliance to add capacity. Qantas have the option to take on an additional eight aircraft under the deal. It’s a move that Qantas has been using with other airlines too, recently announcing they would take on Finnair planes, and their staff. Smart business.
- Coalminer New Hope announced underlying April quarter earnings of $448m, up almost 15% from the previous quarter and 20.6% from the same quarter last year.
- Payments company Tyro shares fell sharply as potential acquirer Potentia withdrew from talks after eight months of discussion.
- Treasury Wine Estate fell sharply to a nine-month low after the winemaker said its commercial wines (lower priced) were struggling and it was reviewing the portfolio. The company recut guidance and now expects earnings growth of 11 to 13%, versus last financial year, but 3% below consensus.
- The Australian dollar fell against the US dollar as investors sought out safety and bets of US rate cuts this year fell away.
Economics
- Commonwealth Bank credit and debit card spending rose by 1.2% on a seasonally adjusted basis in April 2023. A strong monthly result off the back of a weak positive in February and a fall in March. The annual rate of growth continues to fall but remains healthy at 10.1% in April.
- The Reserve Bank of New Zealand lifted the country’s official cash rate by 0.25% to 5.5%, in a 5-2 vote.
- US and European central bankers remain committed to bringing inflation under control with higher rates ahead, but many are now contemplating pauses at upcoming meetings to slow the pace of rate hikes.
- The US economy grew at a 1.3% annual pace in the March quarter, coming in above expectations.
- US home sales rose by 4.1% in April, coming in above expectations. Pending home sales were flat in April.
- A global manufacturing index eased in May into contractionary territory whilst the services component of the same index rose, coming in above expectations. The world is short people whilst productivity remains way too low.
- UK consumer confidence rose for the fourth consecutive month in May.
- UK inflation hit 8.7% in April, down from 10.1% in March, remaining well above the Bank of England’s 2% target. Annual core inflation rose from 6.2% to at 31-year high of 6.8% in April. More rate rises to come.
Politics
- Negotiations between US President and the Republican House Speaker are ongoing but have failed to reach any sort of progress on raising the country’s borrowing limit.
- German Chancellor Olaf Scholz said he wants US President Joe Biden to be re-elected because the Democrat is “better for America”. Interesting stance from an ally to be so brazen leading into the 2024 US elections.
- The US and Taiwan have agreed to boost trade ties, but it won’t be a formal free trade agreement, nor will it address tariffs.
- China has retaliated against the US announcing that semiconductor products made by US company Micron failed to pass a cybersecurity review, warning Chinese infrastructure operators against buying the company’s products.
- Facebook owner Meta Platforms was fined US$1.3 billion by European Union regulators for sending user information to the US. Investors didn’t really seem to care.
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