26 Apr 2024
Weaker US economic growth but inflation higher
Markets
- Local and global equity markets largely rose this week stemming some of the losses from weaker markets over the last 2-3 weeks.
- US quarterly company reporting season continued with some interesting results and price movements – e.g. Tesla shares rose on a weak result, Meta shares fell on a strong result, and Netflix shares fell sharply after the company said they will no longer provide quarterly subscriber numbers.
- In local stock news, Woodside saw a 31% drop in revenue for the first quarter compared to the same time last year, with the company’s CEO encouraged by progress on the oil and gas producer’s three major growth projects.
- BHP Group has approached Anglo American about buying the mining company in what would be a mega-deal. Anglo said that it received an unsolicited all-share merger proposal from the world’s biggest miner. Anglo’s board is reviewing the proposal.
- South32 shares rose strongly after the diversified miner said it was on track to meet production guidance for all its metals except manganese.
- Boss Energy produced its first uranium from their Honeymoon project in South Australia with commissioning running better than expected.
- Brambles shares fell to a three-month low after a softer than expected third quarter sales update, citing ongoing inflationary pressures in labour costs globally, transport costs in Europe, and ongoing fluctuations in fuel prices.
- The Japanese Yen weakened to its lowest level against the US dollar in more than three decades, which may prompt intervention by Japanese authorities.
- The Aussie dollar recovered against the US dollar following stronger than expected Australian inflation data.
- Oil prices rose this week as US inventories shrunk versus expectations for an increase whilst Middle East tensions remained heightened.
Economics
- Australian headline inflation rose by a stronger than expected 1% in the March quarter, with the annual rate easing to 3.6% from 4.1%, potentially pushing out any expected rate cuts. Discretionary inflation fell, showing weakening consumer demand, whilst non-discretionary items (e.g. rents, education, health, new dwelling construction costs, vegetables, insurance) were eight of the top 10 contributors to the quarterly print. Services inflation remains a problem.
- US economic growth grew by 1.6% on an annualised basis in the March quarter, coming in significantly slower than expected, and up to 50% below some street estimates.
- Core US inflation (PCE) came in at 3.7%, higher than the 3.4% expected. Growth slowing, inflation accelerating - stagflation is firmly back on the table.
- A key survey showed the US private sector growing in April but at a slower pace.
- US new home sales rose by 8.8% in March, coming in above expectations. Pending home sales lifted 3.4% in March, also coming in above expectations.
- A key US manufacturing survey fell in April versus expectations of a rise, moving into contractionary territory, whilst an equivalent services survey also fell coming in below expectations. US business activity cooling in April.
- Asking prices for UK homes rose at the fastest annual pace in 12 months, with more higher value houses coming to market. The number of sales is now back to 2019 levels, despite high borrowing costs.
- German producer prices fell less than expected in March, dropping 2.9% on the same time last year, versus expectations for a 3.3% fall.
- China’s central bank kept its loan prime rate unchanged following a better than expected first quarter economic growth print.
Politics
- Israel retaliated to Iran’s missile attack last week with their own strike. There were very mixed reports of any damage or lives lost. Tensions have remained rather settled since, with Iran indicating it has no plans to retaliate. Israel did step up airstrikes on Gaza’s Rafah.
- Australian Prime Minister Anthony Albanese spent most of the week getting caught up in whether online censorship is good or bad under Australia’s draconian “eSafety” laws, with direct barbs levelled at X owner Elon Musk.
- The US senate passed a bill that will see Ukraine, Israel, and Taiwan receive another circa US$100 billion of new aid.
- US Secretary of State Antony Blinken arrived in Shanghai hoping to maintain steadier ties given a number of unresolved issues. Blinken will meet with business leaders before meeting with China’s Foreign Minister and a likely meeting with President Xi.
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