Markets
Local and global equity markets moved higher this week as investors saw positives in early company reporting.
In local stock news, Rio Tinto reported that skilled labour shortages and inflation had hit its second-quarter earnings.
Pendal Group shares fell to a 9-year low, reporting a large drop in funds under management, before entering a trading halt and then rising strongly following news of another approach from Perpetual.
ANZ bank smartly withdrew from talks around regarding a potential acquisition of MYOB whilst almost simultaneously announcing they will acquire Suncorp Bank (not insurance) for $4.9 billion. The deal will include $47 billion of home loans, $45 billion in deposits and $11 billion in commercial loans. ANZ will raise equity to help fund the deal.
ANZ bank also released a trading update for the 3rd quarter of its financial year with revenue up 5% and home loan lending volumes up 3%, with strong lending and margin momentum across all its major businesses.
Whitehaven Coal shares rose strongly to an all-time high after the company announced it expects to report full-year earnings of $3 billion, up from $200 million in the last financial year.
JB Hi-Fi shares rose strongly after the electronics retailer said total sales for fiscal 2022 were up 3.5% to $9.2 billion, with net profit after tax growing 7.7% to almost $545 million.
The Aussie dollar rose slightly this week largely the result of US dollar weakening on weak US economic data.
Economic
CBA household indicators show that spending growth outpaced income growth in Q2 which led to a fall in savings in almost all age groups.Those accessing hardship arrangements remains higher than pre-covid, whilst housing costs continue to rise.
The minutes of the RBA’s July board meeting confirmed that only a 0.25% or 0.50% was considered, but that the focus remains on lifting the cash rate quickly from here. The Bank also expects low financial stability risks arising from the household sector due to higher rates.
US consumer sentiment looks to have levelled off in early July, staying at subdued levels over concerns regarding costs of living and risks of a pending recession.
Data from the US National Association of Home Builders showed that the confidence index amongst home builders fell sharply in July but remains in positive territory. Mortgage applications fell 6.3% in the week ending July 15, a third consecutive drop and now the lowest level since 2000.
The European central bank decided to raise the 3 key interest rates by 0.50% (larger than the 0.25% increase slated) and approved the “transmission protection instrument”. The bank intends to continue reinvesting in full the maturity payments under its asset purchase program for as long as necessary to maintain ample liquidity conditions.
The UK inflation rate increased to 9.4% in June, the highest rate since 1982, and slightly above forecasts of 9.3%. The biggest pressure came from the petrol which increased at a record 42.3%, with food prices up 9.8%, the highest since March 2009, and above May’s increase.
China’s economy grew at the slowest pace since Covid began making the government’s growth target for the year virtually impossible to achieve. Fair to say they will be throwing everything but the kitchen sink at it. Goldman Sachs has cut their growth forecast for the country to 3.3%.
Politics
Gazprom, a Russian gas major, declared force majeure on several European natural gas buyers, a move than may signal an intention to keep supplies capped. It doesn’t make sense for Putin to turn off the taps, but it makes plenty of sense for him to restrict the flow of gas. A full halt of Russian gas supplies could reduce the European Union’s economic growth by 1.5% or more.
The battle to succeed Boris Johnson as British PM is down to the last two – Rishi Sunak and Liz Truss – in the final run-off vote.
Weekly market updates are written by Chris Lioutas. Chris is on the board of Peer Wealth X Futuro Investment Committee. View LinkedIn
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