22 Nov 2024
Russia / Ukraine tensions escalate
Markets
- Local and global stocks had mixed fortunes this week with bell-weather stock Nvidia reporting quarterly results whilst the Russia / Ukraine conflict escalated.
- Nvidia, the single stock that has become the barometer of US economic activity and the tide that lifts the entire equity market, posted US$35.1 billion in third quarter revenue, coming in above expectations. The share price fell on the announcement as their guidance underwhelmed lofty expectations, before a strong finish to the week.
- In local stock news, uranium stocks rose strongly on global supply concerns after Russia banned enriched energy exports to the US. The move creates supply risks for US nuclear plants required to ramp up energy needs to meet surging A.I. demand for power.
- Sonic Healthcare shares rose strongly to a three-month high after the company’s chief executive told its annual meeting that revenue for the first four months of the financial year was 10% higher than the same time a year ago.
- GQG Partners shares fell sharply after US authorities accused Adani Group’s chairman of engaging in a multimillion-dollar bribery and fraud scheme. GQG has large holdings in various Adani Group companies across its managed funds. These holdings had previously contributed strongly to underlying fund returns.
- The gold price rose this week as geopolitical tensions pushed the safe-haven asset higher, arresting some price weakness over the last few weeks.
- Oil prices also rose as the Russia / Ukraine conflict escalated.
- The Aussie dollar rose against the US dollar, interestingly whilst the US dollar continued to rise, with traders pushing out RBA rate cut expectations following the Board’s minutes.
Economics
- The RBA’s November meeting board minutes did their best to confuse markets, stressing the importance of being forward looking in setting policy but equally emphasising their reliance on incoming data to inform their next rate move.
- US central bank chair Jerome Powell says the US economy remains resilient so there’s no rush to lower interest rates. He pointed to a robust labour market and persistent inflation. Chances of a December rate cut fell to a 50/50 chance post comments.
- US factory prices increased 0.2% in October versus the previous month, as expected, following an upwardly revised rise in September. Prices of services went up 0.3%.
- Retail sales in the US increased 0.4% in October versus September, following an upwardly revised 0.8% gain in September, and above market forecasts. Sales increased the most at electronic & appliance stores, auto dealers, food & drink, and building materials.
- Housing starts in the US fell by 3.1% in October compared to a downwardly revised September figure, and below forecasts, as construction activity fell sharply due to hurricanes in the south.
- Annual inflation in the Euro area accelerated to 2% in October 2024, up from 1.7% in September which was the lowest level since April 2021. The October data was in line with expectations. Core inflation was unchanged at 2.7%.
- Annual inflation in the UK rose to 2.3% in October, the highest in six months and well above expectations, compared with 1.7% in September. The largest contribution came from housing and household services, mainly electricity and gas, and restaurants & hotels.
- The Chinese central bank retained its key lending rates in November in line with market expectations. Corporate and household loans were maintained at 3.1% whilst the reference rate for property mortgages was held at 3.6%.
Politics
- Political headlines were largely dominated by US President-elect Donald Trump’s cabinet picks which he has been announcing almost daily. Some interesting picks along with some expected picks. Fair to say these picks are aimed at shaking things up, in line with Trump’s election campaign promises.
- Current US President Biden gave the green light for Ukraine to use US long-range missiles to strike deep into Russia which Ukraine subsequently obliged. The move comes two months before Biden hands over the presidency and risks further escalation in the conflict. In response, Russian President Putin signed a decree lowering the threshold to use nuclear weapons if required, before signalling a willingness to discuss a ceasefire.
- Chinese President Xi used trips to Peru and Brazil to portray himself as a champion of globalisation in contrast to US President-elect Donald Trump’s heavily tariffed approach to trade, with Xi also pledging to open its door wider to the rest of the world. An interesting tactic.
- Australia’s plan to cap international student numbers looks set to be blocked after opposition politicians (the Coalition) decided to vote against the proposed laws. Odd move given the opposition has repeatedly urged cuts to migration.
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