The local equity market finished higher for the week whilst global markets were mixed with emerging market equities receiving a boost.
Parts of the US government bond yield curve are inverting, ie. where short term bond yields are higher than long term bond yields, usually a key indicator of an economic downturn or recession. Shorter term bond yields are trying to reflect inflationary concerns whilst longer term bond yields are reflecting that the economy isn’t robust enough for the central bank to fight inflation with significant rate rises.
In local stock news, the Star Entertainment CEO has resigned following revelations of failings to prevent criminals exploiting its casinos.
CIMIC has recommended shareholders accept a takeover offer as its largest shareholder Hochtief has gained 85% of the company through an off-market bid for $22 per share.
Private equity group Blackstone received approval from the Foreign Investment Review Board to buy casino operator Crown. Blackstone still needs to clear other hurdles in order to complete their $8.9 billion offer.
Telstra’s current CFO Vicki Brady was named the incoming CEO after current CEO Andy Penn said he will be retiring in September. Brady says the carrier can be a growth company again.
Air New Zealand shares resumed trading after revealing a more than $2 billion recapitalisation plan to save the company. The package includes selling a large amount of new shares to investors and the government and a loan from the government.
US crude oil supplies dropped again last week putting additional upward pressure on the oil price thus forcing the US President Biden to release more oil from their strategic reserves, whilst the OPEC+ oil producing nations stuck to its existing deal raising the production target by 432,000 barrels per day. The oil price finished the week lower.
The Federal Government handed down their budget with little surprises with measures unlikely to significantly alter the economic trajectory or have any significant investment market impacts. The key initiative announced was a “cost of living” support package to help offset the costs of rising fuel prices and broader inflationary pressures.
The Government expects 3.5% economic growth this year before settling back to 2.5% next year. They expect headline inflation of 4.25% this year before settling back down at 3% and 2.75% in the years to follow. Unemployment is forecast at 3.75% and is expected to remain low.
Australian retail trade rose by 1.8% in February and is now 9.1% stronger over the year. Strong spending on cafes, restaurants & takeaway, clothing & footwear, as well as department stores drove the result. NSW and SA saw the strongest growth in the month.
Australian job vacancies rose by 6.9% over the 3 months to February to be 200,000 higher than pre-pandemic levels. Job vacancies now total 423,500, a record high, in contrast to the 563,300 people unemployed.
Building approvals rebounded by a strong 43.5% in February after a virus wave impacted the January figure. The rebound was broad across both houses and apartments with gains made across most of the country.
Total private sector credit rose by 0.6% in February, the same pace as January but lower than the gains in November and December. Housing credit growth slowed, whilst personal and business credit growth jumped compared to January.
US consumer confidence for March was below economist expectations according to a key survey. The reading has been slipping in recent months as consumers have become more pessimistic on the economic outlook.
The US Labor Department reported 11.3 million job openings in February, down slightly from January and December’s record. Other data showed that the private sector added 450,000 jobs in March, slightly ahead of economist forecasts.
The Japanese central bank is conducting additional government bond buying to put downward pressure on yields as 10-year bond yields rose to their highest level since January 2016.
Shanghai has locked down half of the city in turns in order to prevent their most recent virus outbreak from getting out of control. Residents barred from leaving their homes, public transport suspended, and private cars will not be allowed on roads unless necessary. This will have a large impact on already weak economic growth.
China’s regulatory crackdowns last year reduce the private sector’s share of the country’s big businesses for the first time in 7 years. The government’s tough regulations fuelled a market selloff that erased some US$1.5 trillion from Chinese stocks at the peak.
The Biden administration has commenced their plan to release roughly 1 million barrels of oil a day from US strategic reserves for up to 6 months to combat rising petrol prices and supply shortages. The plan will assist but releasing strategic reserves should always be considered a very last resort. The plan will see almost one-third of their reserves drawn down.
Germany, which relies on Russia for more than 50% of its natural gas, has triggered the first stage of an emergency plan to brace for a potential cut-off. The third stage would mean gas rationing.
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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