12 Apr 2024
US inflation surprise puts pressure on Fed
Markets
- Local and global equity markets were flat this week as US inflation came in higher than hoped.
- The US inflation news put upward pressure on government bond yields (downward pressure on prices) particularly in the US.
- In local stock news, GQG Partners reported funds under management increased in March to US$143.4 billion with US$4.6 billion of net inflows.
- Ansell shares rose strongly after the glovemaker announced it had reached a deal to buy US listed Kimberly-Clark’s personal protection equipment business for $969 million in cash. Ansell had been eyeing the division for some time.
- NextDC, the country’s largest listed developer and operator of data centres, announced a mega $1.32 billion capital raising to expand its Sydney and Melbourne operations.
Economics
- Australian consumer sentiment fell in March, whilst business conditions remain solid but confidence is weak. Business costs and prices continued to ease, up 0.6% in March, the lowest since early 2021.
- Australian new housing lending rose in February, but at a softer pace. Dwelling price growth continues to remain strong.
- Australian building activity data showed a 6.4% yearly decline in dwelling commencements and a 1.3% yearly fall in completions. More pressure on already low supply.
- US inflation printed above expectations with a 0.4% reading for March, putting an expected July rate cut at risk. Headline inflation rose to 3.5% on the year whilst core inflation rose to 3.8%.
- US producer prices rose 0.2% in March, coming in below expectations, with the annual growth lifting from 1.6% to 2.1%, whilst annual core producer prices rose to 2.8%.
- A key US jobs report was stronger than expected with 303,000 new jobs in March, which put downward pressure on the unemployment rate. Average hourly earnings grew 0.3% to be 4.1% higher on a year ago, in line with expectations, and below the prior reading.
- US consumer inflation expectations for the year ahead remained at 3% for a third consecutive month in March, slightly below expectations and holding at three-year lows.
- The European central bank left its key policy rates on hold. Apparently, a few members were keen to start cutting rates, with markets now expecting a June cut.
- Germany saw strong industrial production data in February, coming in well above expectations.
- Chinese inflation remained flat in March, barely increasing from a year earlier with a continued slump in industrial prices.
- The Reserve Bank of India held rates steady at 6.5% as widely expected. Inflation remains above their 4% target and the Bank has maintained their forecast of 4.5% inflation for this fiscal year.
Politics
- US Treasury Secretary Janet Yellen said China has pursued unfair economic practices including imposing barriers to access foreign firms and taking coercive actions against foreign companies whilst visiting the southern Chinese city of Guangzhou.
- Investment into Australia by Chinese private and state-owned companies fell sharply in 2023 to the second-lowest level in 18 years according to a report.
- Israel reduced its troops in southern Gaza and began a fresh round of ceasefire talks with Hamas.
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