22 Sep 2023
US rates on hold, but no cuts in sight
Markets
- Local and global equity markets fell this week after the US central bank dashed investor hopes for significant rate cuts next year.
- In local stock news, Metcash shares fell after the IGA and Mitre10 supplier announced sales growth had slowed in the 18 weeks to September. Food division sales were up only 1.1%.
- Rio Tinto’s CEO said they plan to become a meaningful lithium producer but believed it was cheaper to explore for their own mines.
- Whitehaven Coal have confirmed that they are participating in the sale process for BHP’s major coking coal mines in Queensland. The mines are worth an estimated $5 billion.
- Newcrest shares moved higher as gold prices rose and their proposed tie-up with Newmont gained foreign investment review board approval.
- Qantas will potentially claw-back up to $14.4 million of former CEO Alan Joyce’s payout after the airline was found to have illegally sacked staff and sued for selling tickets on already cancelled flights.
- Transurban shares fell after the competition regulator opposed its proposed $2 billion acquisition of Horizon Roads, the operator of the EastLink toll road in Melbourne.
- The iron ore price continues to defy expectations hitting the highest levels since April, with investors expecting Chinese authorities to continue boosting economic support via stimulus.
- Russia’s government is apparently considering imposing export duties on all types of oil products over a certain value, which would be much higher than the current fees, to tackle fuel shortages.
Economics
- The Reserve Bank of Australia board meeting minutes for September showed no surprises. There is likely a reluctance to raise rates further from here as they believe there is a narrow path in which to get inflation lower without pushing the economy into recession.
- The US central bank held rates steady at 5.25%-5.50%, a 22-year high, as widely expected but signalled they are prepared to raise rates once more this year and that rates are likely to remain higher for longer. The bank lifted their economic growth forecast for 2023 from 1% to 2.1% whilst reducing their unemployment rate forecast from 4.1% to 3.8%. They also expect inflation to fall to 2.6% in 2024.
- An early reading of a key US consumer sentiment index declined in September, coming in below expectations.
- US inflation expectations fell in early September to the lowest levels in more than two years as consumers grew more optimistic about the economic outlook.
- A key US housing market index fell from 50 to 45 in September, coming in below expectations. US house starts fell by 11.3% in August, with declining housing affordability taking its toll, whilst building permits rose by 6.9%.
- US import prices rose by 0.5% in August with export prices up 1.3%, both coming in ahead of expectations.
- US industrial production lifted 0.4% in August whilst a key manufacturing index rose into positive territory in September, coming in above expectations.
- The European central bank is signalling that interest rates have likely peaked after it raised rates last week.
- The Bank of England voted 5-4 to keep its key interest rate unchanged at 5.25%, their first pause after 14 consecutive rises.
- Headline annual UK CPI inflation fell to 6.7% in August, below forecasts of 7%, and its lowest reading since February 2022.
- Data showed that Germany’s producer prices posted their biggest year-on-year decline on record.
- China’s central bank cut a short-term lending rate a day after lowering banks’ reserve requirement ratio (ie. how much they have to keep on deposit).
- Chinese economic data showed some improvement in August as summer travel and more stimulus boosted consumer spending and factory output. Industrial production and retail sales growth also showed signs of improvement.
Politics
- UK Prime Minister Rishi Sunak is considering diluting some of his green policies, including delaying a 2030 UK ban on new gasoline and diesel cars and weakening a plan to phase out gas boilers.
- The US military is asking for the public’s help to find the missing remains for a US$100 million F-35 fighter jet that crashed after the pilot ejected over South Carolina. Happy hunting.
- Rivals the US and Iran have struck a deal which includes the unfreezing of Iranian funds worth US$6 billion and swapping five detainees each.
- Poland is no longer arming Ukraine with weapons as it is focusing on building up its own stocks of weapons, according to their PM.
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