11 Oct 2024
Investors seek more Chinese stimulus
Markets
- Equity markets were mixed this week, with Australian and US markets higher while most others were flat to weak.
- Australian equities were buoyed by Chinese stimulus while US markets were higher as traders put aside any concerns regarding better-than-expected US economic data and implications for Fed rate cuts.
- Chinese stocks gave back some of their recent surge on disappointment the Chinese government stopped short of committing to more stimulus, which may be required.
- In local stock news, Rio Tinto confirmed it had agreed to pay $9.9 billion ($8.66 a share) for US-based ASX-listed Arcadium Lithium, which is the fifth largest lithium producer globally. The all-cash transaction is at a 90% premium to the share price pre the announcement. Rio’s debt will double to fund the transaction, but their dividend policy will remain unchanged.
- REA Group (realestate.com.au) shares rose after the CEO told shareholders that last month was the company’s best September for Australian listings in nine years, and properties were still selling despite the increased supply, showing robust demand.
- APA Group shares rose after the Australian Energy Regulator made a draft decision to maintain the existing regulation regime on the company’s South West Queensland Pipeline, rather than impose full price regulation.
Economics
- The RBA’s September board minutes interestingly saw them remove their forward guidance from the August minutes which indicated that the cash rate would not be reduced in the short term, potentially opening the door for a rate cut this year. But the minutes did outline scenarios for both a rate increase and decrease.
- Australian new housing lending rose by 1% in August, with the annual rate easing to 23%. Owner-occupied lending rose by 0.7% while investor lending was again stronger at 1.4%. QLD was the key driver of growth in the month.
- Australian new personal lending continued to rise rapidly, up 2% in August alone, and 15.3% for the year. This isn’t a good sign given dwindling retail sales and a household savings rate now below pre-covid levels.
- The NAB Australian business survey showed a bounce in conditions and confidence, with confidence remaining in pessimistic territory. Final prices rose by just 0.5%, the lowest since February 2021.
- Australian consumer sentiment improved solidly according to a key survey, up 6.2%, reflecting less concern over the prospect of interest rate increases. However, the reading remains in pessimistic territory.
- US inflation rose by 0.2% in September, coming in slightly above expectations, with the annual growth rate easing from 2.5% to 2.4%. The core inflation measure lifted 0.3% with the annual rate rising from 3.2% to 3.3%, still well above the Fed’s inflation target.
- The September US central bank minutes showed there was considerable debate around whether to cut rates by 0.25% or 0.50%, but that a substantial majority of officials supported an outsized rate cut.
- US jobs data showed the fastest growth in six months, a surprising drop in unemployment, and higher wages. 254,000 jobs were added versus consensus of 150,000. The result saw investors pare back their expectations for another 0.50% cut at the Fed’s November meeting.
- Total US consumer credit grew by US$8.9 billion in August, coming in well below the US$12 billion expected.
- The New Zealand central bank cut rates by 0.50% as expected taking Kiwi rates from 5.25% to 4.75%. Markets are pricing in another 0.50% cut in November.
Politics
- US dockworkers agreed to end a three-day strike that had paralysed trade on the US East and Gulf coasts and had threatened to become a factor in the presidential election. The issue will come to a head again on January 15th with pay increases of 62% likely back on the table.
- New Zealand’s government will include 149 projects in a fast-track approvals bill, predominantly focused on housing, infrastructure, resources, and agriculture, in a bid to revive their economy.
- The Israeli Prime Minister spoke with US President Joe Biden for the first time in more than a month as Washington sought to temper Israel’s potential retaliation for the missile attack from Iran. It was reported that Biden affirmed the US’s commitment to Israel's security and condemned Iran’s missile attack.
- China has agreed to lift restrictions on lobster imports by the end of the year removing one of the last trade barriers imposed by Beijing on Australian trade.
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