6 Apr 2023
RBA pauses to keep options open
Markets
- A mixed shortened week for equity markets with the local market trending higher whilst global markets were mixed.
- In local stock news, Rio Tinto shares rose after the company announced it had agreed to develop a copper mine in Peru with Canadian metals miner First Quantum.
- Netwealth shares fell after the platform operator decreased its forecast for full-year inflows citing weaker investor sentiment given the current economic uncertainty and market volatility.
- SEEK marginally downgraded revenue guidance on softer job ad volumes, though left earnings guidance unchanged.
- Suncorp shares weakened after the competition regulator flagged a number of potential concerns with the sale of their banking arm to ANZ bank.
- Viva Energy shares rose strongly after the petrol station and refinery owner announced it would acquire the On The Run chain of stores for $1.15 billion from a South Australian family. 205 convenience sites with 174 offering fuel. Viva will fund most of the deal with debt.
- Magellan Financial Group shares fell after the company announced outflows from its Australian equities business, Airlie. The news came after John Sevior announced his retirement from Airlie, though likely unrelated. Interestingly, all three of Magellan Group’s funds are now outperforming their respective benchmarks over the year to the end of March.
- OPEC+ announced they would cut production by more than a million barrels of output a day starting next month, in a surprise move, pushing oil prices higher. The move comes after OPEC+’s previous assurances they would hold supply steady.
Economics
- The RBA left rates unchanged at 3.6% at their April meeting, their first pause since they began raising rates in May 2022, indicating a willingness to see how much of the heavy lifting they’ve already done whilst maintaining their options for further rate hikes if needed.
- Australia’s budget position continues to improve with the cash deficit in 2022/23 running well ahead of expectations with the deficit to February at $12.9 billion, $20.5 billion lower than expectations. The boost comes from both lower spending and higher tax receipts.
- Australia’s trade surplus widened to $13.9 billion in February, coming in ahead of forecasts. Both exports and imports fell, but imports fell by a large 9.1%.
- Australian private sector credit growth rose by 0.3% in February, a step down from the 0.4% monthly pace in January, and slightly below expectations. In annual terms, total credit is 7.6% above levels from a year ago, down from the annualised peak of 9.5% in September/October.
- Australian dwelling prices saw a 0.8% lift across combined capital cities, the first gain since April 2022. Sydney was the main driver with low stock levels, a tight rental market and return of overseas migration. National home prices are down 9% from the April 2022 peak.
- New lending for Australian housing fell by 0.9% in February, coming in better than expectations which was for a 1.8% decline. Building approvals rose by 4% in February but are 31.1% lower over the past year. February’s rise was driven by house approvals whilst apartment approvals weakened again.
- The US central bank’s preferred inflation measure rose by 0.3% in February, just below expectations, to be up 4.6% on a year ago.
- US job openings fell to 9.9 million in February, the lowest since 2021, and down sharply from the downwardly revised 10.6 million in January.
- A US payroll processing firm suggested that private sector employment rose by 145,000 in March, down from a 261,000 gain in February and below economist expectations.
- A key US consumer sentiment index fell sharply in March whilst also coming in below expectations.
- A key US manufacturing index dropped in March from the month prior, coming in below expectations, marking the fifth month the index has been in contractionary territory and at the lowest level since May 2020.
- A key Chinese manufacturing index for March came in well below February levels, potentially signalling that manufacturing activities have lost momentum since reopening begun in November 2022.
Politics
- The UK will join the eleven nation Indo-Pacific free-trade bloc, becoming the first new member since its creation, in a bid to strengthen economic ties with new partners following their departure from the European Union.
- Australian Federal Resources Minister Madeleine King said the nation is committed to remaining a major natural gas supplier for Asia’s largest economies.
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