25 Oct 2024
Markets weaker as US election looms
Markets
- Local and global equity markets saw some weakness this week with the nearing US election and US company quarterly reporting season in focus.
- US government bond yields continued to rise (prices lower) to the highest levels in three months as investors pared their rate cut expectations and began to price in a potential Donald Trump election victory.
- In local stock news, APA Group shares fell to a decade low after its biggest shareholder, UniSuper, sold $500 million worth of shares in a huge block trade.
- Newmont shares fell after the world’s top gold producer missed expectations for third-quarter profit, as higher costs and lower production hit home against the backdrop of a rise in total output.
- Wisetech Global shares plunged after the logistics platform’s board said it was seeking further information and taking external advice following media reports on the conduct of CEO and executive director Richard White. He will take a leave of absence before returning to the company in a consulting position, with the company looking for a new CEO.
- Mineral Resources shares fell to a four-week low after the diversified mining and mining services company’s board said it had engaged legal counsel to investigate tax issues involving managing director Chris Ellison following recent media reports. Ellison had self-reported to the ATO, repaid amounts owed, and disclosed the matter to the board.
- BHP and their Brazilian partner Vale are a step closer to finalising a deal with Brazilian authorities to provide a multi-billion dollar settlement for one of the country’s worst mining disasters. Ongoing negotiations point to an approximate $45 billion settlement.
- Viva Energy shares fell to a two-year low after the oil refinery and petrol station owner said convenience sales had been softer in recent months.
- Flight Centre shares fell sharply to a one and half year low after the online travel agent issued a poorly received trading update, which suggested a large downgrade to consensus first-half earnings estimates. The negative sentiment saw other travel stocks also fall.
- Gold prices rose to new record highs during the week, boosted by demand for safe-haven assets, which is interesting given equity markets are also making new highs. Uncertainty surrounding the upcoming US election and expectations of further central bank rate cuts are also supporting gold prices.
Economics
- The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism.
- Australian manufacturing appeared to weaken in October from September according to advanced readings. This indicates a deterioration in the sector’s health for the ninth consecutive month, at the fastest rate since May 2020, with weak underlying demand and subdued market conditions.
- Housing starts in the US eased by 0.5% in September from the previous month, in line with market expectations, trimming the downward revised 7.8% increase in August.
- Retail sales in the UK unexpectedly increased 0.3% in September, following a 1% surge in August and ahead of forecasts for a 0.3% drop. Sales at non-food stores jumped 2.5% whilst sales at supermarkets fell 2.4%. Sales jumped 3.9% on the same time last year.
- Passenger car registrations in the European Union dropped by 6.1% in September versus the same time last year. It was a softer decline than the 18.3% fall in August with registrations falling in France, Italy, and Germany.
- The Chinese economy expanded 4.6% on the same time last year in the September quarter, compared with market forecasts of 4.5% and a 4.7% rise in the June quarter. It marked the slowest annual growth rate since the March quarter of 2021 and continues to come in below China’s full-year target of around 5%.
- There we some positive signs for the Chinese economy in September with industrial output and retail sales seeing their largest increases in four months, and the urban jobless rate fell to a three-month low of 5.1%. In contrast, exports rose the least in five months with imports sluggish.
- The Chinese central bank slashed key lending rates to new lows as they stepped up efforts to support a weakening economy. The one-year loan prime rate, used for most corporate and household loans, was cut by 0.25% to 3.1%, whilst the five-year rate used for property mortgages was reduced by the same margin to 3.6%.
Politics
- A Hezbollah drone penetrated Israel’s air defences and exploded next to the private home of Prime Minister Benjamin Netanyahu.
- Wine exports from Australia jumped by more than a third in the year through September, boosted by an increase in shipments to China after they lifted tariffs on Australian wine producers. The value of shipments rose to $2.4 billion, the highest in more than three years.
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