29 Sep 2023
US government shutdown takes centre stage
Markets
- Local and global equity markets were weaker this week on mounting investor concerns that central bank interest rate relief looks unlikely and concerns regarding an impending US government shutdown.
- In local stock news, Costa Group’s board unanimously accepted the bid from Paine Schwartz at $3.20 per share. The acceptance comes after the acquirer recently revised their bid price lower from $3.50 per share for the fruit and vegetable producer.
- News Corp shares rose after Rupert Murdoch announced he was handing over the reins to his son Lachlan.
- Qantas shares fell after the airline said it would spend another $80 million to address customer pain points, including call centre resourcing and in-flight catering. The company also warned of a $200 million blow out on jet fuel because of rising prices and a lower Aussie dollar.
- Funeral home operator InvoCare shares rose after an independent expert concluded TPG Capital’s $12.70 per share, $1.8 billion offer was fair and reasonable.
- Suncorp Group announced the CEO of their banking arm would depart at the end of the year for another role. Suncorp is still working with the competition regulator to sell its banking arm to ANZ.
- Star Entertainment shares resumed trading post a $565 million institutional placement at 60c with another $185 million via a non-renounceable rights issue. The proceeds will be used to reduce debt.
- Gina Rinehart is complicating Albemarle’s $6.6 billion tilt for Liontown Resources announcing an increase in her stake to 10.69%
- The oil price rose to a one year high as US stockpiles declined to the lowest since July 2022.
Economics
- Australian consumer prices rose by 0.8% in August, with the annual rate rising to 5.2%, as expected. Excluding volatile items, core inflation continued to fall, highlighting the impact of volatile items (e.g., petrol & diesel prices) on the August number.
- Australian retail trade rose by 0.2% in August, coming in below expectations, to be just 1.5% higher through the year. Trade remained strong for eating out whilst spending on clothing and footwear was also strong, boosted by the woman’s world cup.
- Australian job vacancies fell by 8.9% over the three months to August 2023, marking the fifth consecutive quarterly decline, and follows a downwardly revised 2.5% decline over the three months to May 2023. Since the peak in May 2022, there has been a 22% decline in vacancies.
- The Australian federal budget position for 2022/2023 has come in much stronger than previously estimated, with a $22.1 billion surplus. The improvement came mostly from the revenue side due to higher company tax receipts.
- The US economy grew at a 2.1% annual pace in the June quarter, slightly below expectations.
- A key US central bank member said there is a 40% chance that the bank will need to raise interest rates meaningfully to beat inflation. The same member said he expects one more rate rise this year.
- The US services sector slipped to an eight month low showing the economy losing some momentum. The equivalent manufacturing sector data rose but remained in contractionary territory.
- A key US house price index rose strongly in July, coming in ahead of expectations. However, new home sales decreased sharply in August, coming in well below expectations for a smaller decrease.
- US consumer confidence fell in September, coming in below expectations.
- A key European manufacturing and services sector index rose to a two-month high in September but remained in contractionary territory. The UK equivalent worsened to a 32-month low, remaining in contractionary territory.
- Data showed a fifth straight fall in the closely followed German business climate index data, with sentiment worsening.
- China’s August economic data provided signs of stabilisation giving some confidence that a soft landing for the economy is possible, with China also easing capital controls for foreigners in Shanghai and Beijing.
- Profits at China’s industrial firms extended a double-digit drop for the first eight months, but the pace of declines eased slightly as a high volume of smaller policy support measures work their way through the economy.
Politics
- The US government is once again close to running out of money to keep itself operating, with warring factions within the Republican Party in the US Congress (House) showing no signs of coming together to pass a stop-gap funding bill to fund the government past 1 October. A bipartisan bill from the Senate was also pre-emptively rejected.
- Daniel Andrews resigned suddenly as the premier of Victoria following mounting pressure. Long-time Victorian Labor MP Jacinta Allan was unanimously backed by her party and sworn in as the state’s 49th leader.
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