30 Aug 2024
US Fed readies for first rate cut
Markets
- Equity markets were mixed this week, with European and Indian equity markets the highlight. US and Australia were largely flat, while the rest of Asia was weak.
- In local stocks stock news, Fisher & Paykel Healthcare shares rose strongly to a 3-year high after the NZ respiratory product company upgraded guidance. Year to date has been strong across all products and regions according to their CEO.
- ANZ bank shares fell after the financial regulator APRA required it to hold an additional $250 million in risk capital following issues in its markets business.
- Woodside shares rose after the company announced its underlying net profit fell 14% to $2.41 billion in the half year to June 30, but came in better than expected, with the interim dividend declared also well ahead of expectations.
- BHP shares rose even as the company reported a slump in full-year net profit after write-downs and other charges and warned commodity prices hadn’t stabilised. The company will focus on growing its copper business through existing and incoming projects after its failed attempt to buy Anglo American.
- Coles shares rose to a two-year high after the supermarket giant grew its normalised full-year profit by 2.1% to $1.1 billion, emphasising there’s no price gouging on as some have suggested. Woolworths shares also rose after the group announced full-year sales up 3.7%, earnings ahead of expectations and a special dividend.
- ResMed is now saying that the GLP-1 weight loss drug impact will be a tailwind (positive) on its sleep apnoea business, versus management’s original neutral view last year, and the markets’ current negative view.
- Lynas Rare Earths said Chinese demand for its materials is picking up, with prices showing signs of recovery following a two-year slump.
- Mineral Resources shares came under pressure after the company ruled out dividend payments after falling lithium prices dented their annual profit. While the result was in line with expectations, they guided to higher capital expenditure and lower lithium production in the period ahead.
- Oil prices rose early in the week on supply concerns, with escalating conflict in the Middle East as well as production cuts in Libya. There was some relief later in the week with lower US demand.
Economics
- The monthly Australian CPI indicator showed inflation eased to 3.5% for the year in July, down from 3.8% in June, but slightly higher than economists had expected. The introduction of government energy price subsidies supported the slower growth in prices. The largest contributors to the July print were housing, food, and alcohol & tobacco.
- The volume of construction work done in the June quarter rose by just 0.1% and is 1.2% higher through the year. Building construction fell by 0.3% in the quarter, and is 1.8% lower through the year, while engineering construction continues to be the strongest segment.
- The total volume of Australian capital expenditure fell by 2.2% in the June quarter, the largest fall since the same quarter in 2020 (covid affected), and weaker than expected. Mining investment rose, while non-mining investment fell by 3.6%.
- The much-anticipated speech from the US central bank chair at Jackson Hole Wyoming paved the path for a September rate cut. The chair commented that the upside risks to inflation have diminished and that they didn’t want to see any further weakening in labour market conditions.
- The US economy expanded at a 3% annualised pace in the June quarter, coming in above expectations.
- Some better data on the US business and manufacturing front with durable goods orders jumping almost 10% in July, while a key manufacturing index rose in August, whilst remaining in contractionary territory. Both were ahead of expectations.
- US housing market data saw a key price index fall slightly in June while a 20-city home price index lifted 0.4% in June, showing contrast results.
- US consumer confidence rose in August to a six-month high, coming in above expectations.
Politics
- British Prime Minister Keir Starmer said it would take a long time to rebuild Britain and rid it of the rot he says took hold under the previous government, warning things will get worse before they get better. Either true, or great cover for poor leadership ahead. Time will tell.
- The campaigns of Donald Trump and Kamala Harris have clashed with the Harris team trying to change the rules, previously agreed, of their upcoming debate. The cable network hosting the debate has declined their request after Trump said he would pull out if the rules were changed.
- Meta (Facebook, Instagram, WhatsApp) CEO Mark Zuckerberg penned an open letter saying senior officials in the Biden administration had pressured his social media company to censor covid content during the pandemic, adding that he would push back if it happened again.
- Canada has followed the lead of the US and Europe saying it would impose 100% tariffs on imports of Chinese electric vehicles while announcing a 25% tariff on imported steel and aluminium from China.
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