5 Apr 2024
Rising geopolitical tensions thwart investor sentiment
Markets
- Local and global equity markets were broadly weaker this week as geopolitical tensions rose and the somewhat hawkish comments from the US central bank.
- In local stock news, Fisher & Paykel shares fell on a recall of their breathing support system with the issue impacting devices made before 2017. The recall will result in a $12 million impact for financial year 2024, about 5% of recent guidance.
- A surging gold price saw the share prices of gold miners rise sharply with Newmont up more than 5% during the week.
- Whitehaven Coal completed its $5 billion acquisition of two coking coalmines in Queensland from BHP and Mitsubishi, effectively doubling the size of the business.
- Treasury Wine Estates shares saw upward support following China’s announcement it had dropped its tariffs on Australian wine imports. The company is looking to reallocate a portion of its global market towards rebuilding its Chinese distribution.
- Australian shipbuilder Austal received a $2.83 bid from South Korea’s Hanwha, a 28% premium to the last close price. Plenty of hoops to jump through given Austal’s defence contracts with both the Australian and US navy.
- Suncorp shares rose after the company announced the sale of its NZ-based subsidiary Asteron Life to Resolution Life for $376 million.
- Oil prices surged after US Secretary of State announced Ukraine will become a member of NATO. Prices have already edged up to a five-month high on expectations oil demand will climb following the release of positive economic news from the US and China, OPEC+ supply cuts, and threats from Ukrainian attacks on Russian energy facilities.
Economics
- The RBA March meeting minutes indicated the Board did not consider raising rates in March, assessing the risks to the outlook as broadly balanced. Priority remains on returning inflation to target.
- Australian retail trade rose by 0.3% in February, a little lower than expectations, boosted by clothing & footwear and departments stores with restaurants & takeaway also assisting. Household goods and other retailing were soft. Annual growth sits at just 1.6% with retail having peaked in November 2023.
- Australian dwelling prices rose 0.6% in March, the same pace of gain as February, with strong gains coming from Brisbane, Adelaide, and Perth. Prices rose more modestly in Sydney whilst Melbourne was flat.
- Building approvals in Australia fell by 1.9% in February to be 5.8% lower through the year. Private sector approvals for houses rose by 10.7% in the month whilst multi-unit approvals fell by 24.9%.
- Stronger than expected survey data for the US manufacturing sector showed activity, new orders, and input prices expanding.
- US private payroll data showed jobs increased by 184,000 in March, coming in well above expectations.
- The US central bank’s preferred measure of inflation showed a rise of 0.3% in February, slower than the previous month and in line with expectations. Chair of the Fed, Jerome Powell stated, it wouldn’t be appropriate to lower rates until inflation is in check and that the Fed is no rush to cut rates.
- Consumer prices in the Eurozone eased to 2.4% in March from 2.6% in February, coming in below expectations.
- Inflation in UK stores dropped to its lowest level in more than two years. The rate of price rises slowed to a 1.3% annual pace last month, sharply down from 2.5% in February.
- A key survey showed sentiment among large Japanese manufacturers worsened for the first time in four quarters.
- China factory activity beat expectations in March whilst other manufacturing data snapped a five-month contraction in March to rise to the highest level in a year, boosting optimism about the country’s economic growth outlook.
Politics
- An Israeli air strike in Damascus, Syria, killed seven Iranian military advisers, raising fears the fighting might spread further and putting upward pressure on oil prices. Iran has announced they will seek retribution for the attack.
- US Secretary of State Anthony Blinken made comments at a press conference that Ukraine will become a member of NATO, as they prepare to build a bridge to that membership at the summit. Russian President Putin has made it clear that Ukraine joining NATO would be crossing a red line.
- US regulators, led by the US Fed, are said to have thwarted a push to make climate risk a focus of global financial rules. European central bankers have been advocating for the push, whilst US officials cited their narrow mandate and concerns the committee was overstepping its purpose.
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