5 Jul 2024
Shares higher on renewed dovish Fed tone
Markets
- Local and global stock markets rose, buoyed by slightly more dovish US central bank comments that appeared to suggest disinflation had recommenced.
- In local stock news, Federal Treasurer Jim Chalmers approved Suncorp’s $5 billion sale of its banking arm to ANZ. Lots of work for ANZ to do to successfully integrate.
- Insurance Australia Group shares rose strongly after the insurer announced it had negotiated reinsurance protection from global insurers to protect against natural perils volatility over the next five years. They also reaffirmed guidance.
- Mirvac shares rose after the real estate developer and owner said it had completed sales of $1 billion in assets, including 367 Collins Street in Melbourne. The company also announced the sale of a two-thirds stake in a new office tower in Sydney to Japanese developer Mitsui.
- Santos shares rose strongly to an eight-month high after a report said state-owned Middle Eastern oil giants Saudi Aramco and Abu Dhabi National Oil Company were separately considering bids for Australia’s second largest gas company.
- The Aussie dollar pushed higher this week against the US dollar, buoyed by stronger than expected retail sales locally and a dovish tone from the US central bank.
Economics
- The RBA minutes from their last meeting showed the board was becoming less comfortable with its current approach of holding rates steady while waiting for inflation to ease.
- Australian retail sales rose 0.6% in May, up from 0.1% in April, and better than the 0.3% expected. End of financial year sales starting earlier may have helped the May print.
- Australian home prices across the eight capital cities rose by 0.7% in June according to CoreLogic, a slight fall from the 0.8% pace recorded in May. The strongest gains came from Perth, Adelaide and Brisbane. Sydney recorded softer gains, while Melbourne prices fell. Prices are up 3.7% in the first half of this year.
- Building approvals in Australia rose by 5.5% in May, boosted by a 16.3% lift in multi-unit dwellings. House approvals rose by 2.1% in the month.
- The US central bank’s preferred measure of inflation rose 2.6% in May from a year earlier, in line with expectations. The May reading was the lowest since 2021 and compares with the 2.7% rise in April.
- The US central bank chair commented that the US economy was now showing signs of inflation resuming its downward trend but emphasised that more progress would be needed before they can put rate cuts on the table.
- A key US consumer sentiment survey fell in June, from May readings, but came in well above expectations which were for a bigger fall.
- US jobs data showed there were 8.14 million job openings in May, compared to 8.05 million in the prior month, and ahead of the 7.94 million that had been forecast.
- US private sector employment rose by 150,000 jobs in June, down from a rise of 157,000 in May, marking the third month in a row in which job creation has slowed.
- Other US economic data was mixed with falls in construction spending and factory activity, which fell for a third straight month, whilst two conflicting manufacturing data readings showed a slight rise and fall respectively.
- Annual inflation in the Euro area matched forecasts by moderating to 2.5% in June, after accelerating briefly in May.
- Annual German inflation fell to 2.2% in June, from 2.4% in May, coming in below forecasts.
- The latest Chinese manufacturing data showed increased activity among smaller manufacturers, which grew at the fastest pace since 2021, due to improved foreign demand. The overall reading was the same as last month and in line with expectations.
- China’s factory activity contracted for the second straight month in June, signalling continued weakness.
Politics
- The first US presidential debate took place at the back end of last week and was a disastrous showing for President Biden, with calls from within his own party that he pulls out of the race and possibly even step down from being President. The Democratic Party will need to move quickly on either confirming his nomination or replacing him.
- The first round in the snap-called French elections showed Marine Le Pen’s right-wing National Rally with a winning lead but may fall short of an absolute majority. Alliances will be key. The result seems to have backfired on President Macron’s snap election strategy with his party coming in third. A second round will be held this weekend.
- Early signs in the UK election results seemed to confirm a landslide victory for Keir Starmer’s Labour party, potentially securing 410 seats from the 650 available.
- The Australian government has raised student visa application fees by 125% as they aim to “create a migration system which is fairer, smaller, and better able to deliver for Australia”.
- Indian Prime Minister Narendra Modi is heading to Russia for talks with President Vladimir Putin, which will be his first visit the country since Russia invaded Ukraine.
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