28 Jun 2024
Rate hikes back on the table
Markets
- A mixed week for equity markets with US tech leading global markets while the Australian monthly inflation print spooked local investors.
- In local stock news, Mineral Resources shares fell to a near two-year low with the company announcing it would close its Yilgarn iron ore mine in the Pilbara, which will see 1,000 employees lose their jobs.
- Myer shares rose strongly after the company announced a takeover bid for Premier Investments’ Apparel Brands clothing labels, including Just Jeans, Jay Jays, and Portmans.
- ResMed shares fell sharply after Eli Lilly announced trials in their weight-loss drug were successful, meaning the drug had shown to have reduced sleep apnoea severity.
- Metcash reported a mixed result with financial year 2024 sales in line with expectations, a 4% profit miss, and somewhat cautious guidance.
- Uranium producer Paladin Energy shares fell after the company agreed to acquire Fission Uranium for $1.2 billion in shares at a 26% premium to Fission’s recent share price on the Toronto stock exchange.
- Discretionary retail stocks fell, some more sharply than others, following the surprise monthly inflation print. A combination of central bank missteps (too dovish) and unchecked government spending may see more pain for households and consumers if the central bank raises rates.
- The Japanese Yen fell to the weakest level since 1986, with renewed speculation authorities will be forced to support the currency again. The Yen has now fallen more than 12% year to date, putting significant upward pressure on Japanese import prices.
Economics
- Australia’s monthly inflation indicator rose by more than expected to 4% for the year, with the trimmed mean measure (excluding volatile items) rising to 4.4%. Both readings surprised on the up and showed little to no progress on the RBA’s inflation fighting front, with prices too high for housing, food, transport, and alcohol & tobacco components. Rate hikes now firmly back on the table.
- The number of Australian job vacancies fell by 2.7% in the three months to May, with the peak to trough decline now at 26%. The health care and social assistance sectors account for almost one in five job vacancies.
- Australia consumer confidence rose a little in May, with most components lifting. But it remained at very pessimistic levels.
- US manufacturing data showed improvement from May to June, coming in above expectations, with the services component also improving.
- US consumer confidence slipped in June with pockets of weakness in the economy increasingly more visible.
- Two key US house price indices showed a small increase in prior month levels. New home sales fell by 11.3% in May to a 619,000 annualised rate, coming in below expectations.
- Eurozone manufacturing data fell in June, coming in below expectations.
- A barometer of German business conditions declined in June from May, coming in below expectations of an improvement.
- Data showed robust activity for manufacturing firms in India, but future business expectations slumped for the manufacturing and services sectors.
- The governor of the Central Bank of India remains confident about the bank’s 7.2% growth projection for the economy, but maintained they have more work to do on the inflation front to bring it back to target.
- China’s industrial profits rose at a sharply lower pace in May, showing continued struggles for the world’s second largest economy.
Politics
- The US Treasury Department added Japan to its “monitoring list” for foreign exchange practices but stopped short of labelling it a currency manipulator. Japan joins China, Germany, Malaysia, Singapore, Taiwan, and Vietnam on the list. Relatively easy to admonish other countries when you have reserve currency status.
- A measure of foreign direct investment in China declined for the twelfth straight month, showing the continued struggle China faces to improve their appeal to overseas investors to boost growth.
- The Australian government is cracking down on unfair prices at the major supermarket chains, with potential multimillion-dollar fines for anti-competitive behaviour, which will apply to any company with sales of more than $5 billion (Coles, Woolworths, Metcash, Aldi).
- The European Union and China agreed to hold talks on the planned imposition of tariffs on Chinese-made electric vehicles.
- Israel Prime Minister Benjamin Netanyahu said Israel will very soon end the intense stage of fighting in Gaza and will focus on targeted operations against Hamas.
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