28 Apr 2023
Markets mixed as US banks back in the firing line
Markets
- Local and global equity markets were mixed to slightly weaker for the week as investors digested key economic data and US banking sector stress.
- US banks came under pressure again after First Republic, a San Francisco bank, reported a poor set of quarterly results, with investors again questioning the regulator / central bank’s resolve.
- In local stock news, South32 shares fell after the company downgraded production guidance across several mines largely due to weather.
- InvoCare shares fell sharply after TPG Global withdrew their non-binding takeover for the funeral service operator. InvoCare’s board of directors had felt that the $12.65 per share offer undervalued the company.
- Fortescue Metals shares fell on lower quarterly production and higher costs, with weakness in iron ore prices more recently not helping.
- Mineral Resources shares fell to a six-month low after downgrading guidance for its mining services business and reporting weaker than expected third quarter lithium sales.
- Blackmores shares soared to an eighteen-month high after the vitamin maker agreed to be acquired by Japanese brewing giant Kirin for $1.88 billion.
Economics
- Australian headline inflation rose by 1.4% in the quarter which saw the annual rate fall to 7%. The RBA’s preferred measure of underlying inflation increased by 1.2% in the quarter with the annual rate falling to 6.6%. Goods inflation falling sharply, services inflation going the wrong way. Good to see it lower overall, but plenty of work still to be done.
- Australian export prices rose by 1.6% in the first quarter despite falling coal and gas prices. Import prices fell by 4.2% due to slowing economic activity, a stronger Aussie dollar, and input prices easing.
- Australian private sector credit increased by 0.3% in March, in line with expectations but lower than in February. Investor housing lending growth picked up offsetting softer credit growth elsewhere.
- The US economy grew 1.1% in the first quarter, below economist expectations of an expansion of 2%. The report also showed stronger than expected inflation.
- Investors are betting a roughly 75% chance of the US central bank raising rates at their next meeting, whilst they continue to anticipate rate cuts later this year.
- US home prices rose 0.4% on the year to February, coming in well ahead of expectations. New home sales rose 9.6% in March in a huge surprise versus expectations.
- US consumer confidence fell in April to a nine-month low, coming in well below expectations.
- S&P Global data showed business activity jumped to an 11-month high at manufacturing firms based in the US and a 12-month high for companies in the service industry. Prices also rose which puts additional pressure on the Fed.
- UK consumer confidence continued to recover in April, increasing for the third consecutive month and coming in above expectations. Households were less pessimistic about their financial situation over the next 12 months.
Politics
- Chile is the latest country to control or nationalise more of their commodity base with their leader announcing nationalisation of their lithium assets, the world’s 2nd largest producer of the metal. The proposal falls short of full nationalisation with the duration of existing concessions to be respected. The proposal needs parliamentary approval.
- Investors representing more than US$5bn of Credit Suisse bonds have sued the Swiss regulator over its decision to wipe out their investments, and leave equity holders whole, as part of the forced absorption of Credit Suisse into UBS.
- US President Joe Biden said he will seek a second White House term in 2024.
- Germany is in talks to limit the export of chemicals to China that are used to manufacture semiconductors.
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