10 May 2024
US labour market shows signs of cooling
Markets
- Local and global equity markets broadly moved higher this week helped by more signs of a cooling labour market.
- In local stock news, consumer discretionary stocks were particularly weak with notable companies indicating weakness in the consumer.
- Scentre Group shares fell after the Westfield owner said customer visits were up 2.8 million to 175 million for the first 18 weeks of the year. The share price fall is likely a function of weakness in consumer discretionary companies.
- Westpac’s first half profit met analyst expectations as competition in mortgages weighed on the Australian lender’s key consumer business. Net income fell 16% to $3.3 billion from the previous year in the six months to the end of March. The bank raised its dividend and will undertake a $1 billion share buyback.
- ANZ Bank announced its half-year cash profit was down 7% to $3.55 billion, compared to the second half of 2023. Revenue was broadly in line, with costs higher than expected. The bank announced a $2 billion buyback.
- Dexus showed operating metrics remained fairly stable despite the broader office market facing higher vacancies, reiterating this financial years’ distribution guidance of 48c.
- Perpetual Group agreed to sell its wealth management and corporate trust business, along with the Perpetual name, to KKR for $2.2 billion. The divestment would leave Perpetual as a single line asset management business.
Economics
- The RBA board left the cash rate unchanged at 4.35% at their May meeting, largely as expected. The meeting was a live one with speculation of a potential rate increase on the table. The post meeting statement and press conference made for interesting reading and listening.
- The RBA has revised its inflation and economic growth forecasts, upwardly revising its end of 2024 inflation forecast from 3.2% to 3.8% given higher petrol prices and higher than expected services price inflation. The bank also downwardly revised their economic growth forecasts for this year.
- SEEK Australian job ads fell by 4.7% in April whilst the number of applicants per job ad rose by 8.6% in the month.
- Retail trade volumes are 1.3% lower over the past year, falling 0.4% in the March quarter. The contraction is starker when accounting for strong population growth in the quarter, circa 150,000, whilst the population has increased by 2.4% overt the past year. WA, QLD, ACT, and NSW saw the largest declines in the quarter whilst VIC recorded two consecutive quarters of declines.
- Rents in Australian residential property hit a fresh record in April with some cities seeing renewed growth momentum. Median dwelling rent was $627 per week nationwide as of April, up 8.5% from a year ago. Sydney was the most expensive market at $770 per week.
- US labour data was weaker than expected with non-farm payroll jobs rising 175,000 in April, the fewest since October 2023. The result saw the jobless rate rise from 3.8% to 3.9%. Average hourly earnings rose in April to be 3.9% higher on a year ago, the slowest pace since May 2021.
- A key US services index fell into contractionary territory in April, with the reading the lowest since December 2022 and weaker than expected.
- The Bank of England kept their cash rate on hold at a 16-year high, however, a second bank official backed a rate cut in a 7-2 vote.
- Eurozone business activity expanded at its fastest pace in almost a year in April, assisted by a recovery in the region’s services industry which has offset a deeper downturn in manufacturing.
- German industrial production declined in March, although less than expected thanks to the construction sector.
- China exports rose slightly more than expected in April, increasing 1.5% in US dollar terms from a year earlier. Imports climbed 8.4%.
Politics
- Australian officials have expressed concerns to Beijing over a mid-air incident between a Chinese fighter jet and an Australian military helicopter. No Australian personnel were injured. PM Albanese’s response was rather measured, whilst China has accused the Australian aircraft of conducting dangerous manoeuvres.
- The Australian Federal Government has warned of smaller revenue upgrades to the budget, saying it will be just a fraction of those in previous updates due to weakness in the global economy, a softening labour market, and lower commodity prices.
- Global conflict has continued to disrupt container shipping traffic in the Red Sea, worsening more recently. A key shipping group expects a 15-20% reduction in the industry’s capacity between China and Europe in the second quarter.
- TikTok is suing the US government over a law that would force China’s ByteDance to sell the app or face a ban on national security concerns. TikTok’s claim says such a move would stifle free speech.
- The US Defence Secretary said the US has paused the supply of “high payload” munitions to Israel over concerns about a potential military offensive on the Gazan city of Rafah. The US wants no major conflict to take place in Rafah.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
