1 Dec 2023
Investors pause on barrage of economic data
Markets
- Local and global equity markets capped off a very strong November with a more settled week as investors took in a barrage of economic news.
- In local stock news, Whitehaven Coal shares rose after the Queensland government gave initial approval to the company’s coking coal project southwest of Moranbah.
- IGO shares fell after the nickel and lithium producer reconfirmed former Rio Tinto executive Ivan Vella would be its next CEO despite controversy regarding his mishandling of confidential Rio documents as he left the company. IGO’s review found no confidential information was compromised, and Vella had accepted responsibility for the breach.
- QBE Insurance shares rallied after the company said it expects gross written premium growth of 10% for financial year 2023. Third quarter results were strong with gross written premium growth of 7% and renewal rate increases of 9.6%.
- Fisher & Paykel Healthcare shares rose strongly on the back of a first half result that beat expectations, boosted by strong homecare product sales.
- A volatile week for oil prices, with prices surging early in the week on reports the Saudis were asking other OPEC+ members to reduce their oil output with some members resisting. OPEC+ agreed to cut supply, but the market wasn’t fully convinced members will comply and demand concerns then weighed on prices.
Economics
- Australian consumer prices fell by 0.4% in October, with prices now 4.9% higher over the year. This was the largest monthly decline in prices since September 2020, pushing the annual rate below expectations. The monthly inflation data remains spurious at best, with international holiday travel and accommodation falling by 12%, rents declining, new dwelling purchase cost inflation decelerating, and electricity prices rising.
- Australian retail trade fell by 0.2% in October, following a solid gain in September, and expectations of a 0.1% increase. There was broad weakness with the exception of food retailing. Over the past year, retail trade has increased by 1.2% which is the slowest annual pace of growth (outside of the pandemic) since November 2010. No doubt November will see an improvement given Black Friday and Cyber Monday sales periods.
- The RBA has a new deputy governor with former Bank of England executive director for markets Andrew Hauser appointed by the government for a five-year term. He is the first foreigner to hold the position. Interesting move.
- Australian construction work done increased by 1.3% in the third quarter, whilst the second quarter figures were revised up significantly from 0.4% to 2%. Building construction rose by 0.2%, led by residential construction which rose by 1.3%, whilst engineering construction rose by a large 2.6% in the quarter to be 14.9% higher through the year.
- For the first four months of the 2024 financial year, the Australian Commonwealth government budget deficit is running at $17 billion, significantly better than expectations, with the large improvement coming on the revenue side (ie. taxation).
- The total volume of Australian capital expenditure rose by 0.6% in the third quarter whilst the June quarter was also revised upwards. Mining investment rose by 5.6% while non-mining fell by 1.3%.
- Australian private sector credit growth moderated to 0.3% in October, as personal and business credit growth slowed. Building approvals increased by 7.5%, boosted by private sector multi-unit dwelling approvals that drove the result up.
- Australian home prices showed a slower increase in prices of 0.6% with momentum easing in Sydney and negative growth in Melbourne.
- US economic growth came in at an annual rate of 5.2% for the third quarter, the fastest quarterly growth rate since late 2021, and above expectations.
- A key measure of US inflation, excluding food and energy prices, rose 3.5% on the same time last year in October, easing from 3.7% in September and hitting its lowest level since the second quarter of 2021.
- A combined US manufacturing and services index remained unchanged in November in expansionary territory, with the manufacturing component easing whilst the services component rose.
- US new home sales fell by 5.6% in October, coming in below expectations, whilst another manufacturing index dipped further into contractionary territory.
- Eurozone inflation eased more than expected to 2.4% in November, from 2.9% in October. German inflation came in at 3.2% whilst Spanish inflation fell to a twelve-month low of 3.2%.
- China’s industrial profits eased for the eighth straight month as the economy tries to find a floor.
- China’s November manufacturing activity data showed contraction for a second month, signalling continued weakness in the world’s second largest economy.
Politics
- The Australian government will introduce legislation this week to revamp the RBA according to Treasurer Jim Chalmers. The bill follows a review in May which made 51 recommendations for change. Remains to be seen whether the recommendations will improve the RBA’s function or hinder via increased bureaucracy or lost independence.
- Israel and Hamas agreed to extend a cease-fire until the end of this week, following negotiations over the release of more hostages, bringing hope that a more permanent ceasefire might be on the table.
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