Markets
Local and global equity markets fell this week as rate rises and increasingly hawkish central bank rhetoric spooked investors.
In local stock news, OZ Minerals shares rose during the week after reports that BHP was considering upping its $8.4 billion, $25 a share, offer for the copper miner.
Origin shares fell after the oil and gas major offloaded its rights in the NT’s Beetaloo Basin to focus on “cleaner” projects. The move will see them book a non-cash loss of $70-90 million related to the transaction.
Fortescue Metals shares fell after the company announced plans to invest $9.2 billion to achieve net zero carbon emissions by 2030.
Coal miner New Hope shares soared to an all-time high after reporting its full-year profit after tax had risen more than 12-fold to almost $1 billion thanks to soaring coal prices.
Miner IGO shares rose on news of promising exploration results at a lithium project in WA’s Goldfields region, in which it holds a 25% stake.
Viva Energy shares rose after agreeing to buy the Coles Express convenience store and petrol network from Coles for $300 million. Viva has been the fuel supplier to the 710-station chain and the move will make them the clear number two player in both fuel and convenience.
The Atlas Arteria saga continued with IFM launching another attack on the toll road group whilst the company’s CEO maintains that its purchase of a US toll road, the Chicago Skyway, is not designed to deter IFM from making a full takeover bid. Atlas has entered into an agreement to acquire a 66.67% majority interest in the concession at a little over US$2 billion whilst launching an equity raise to pay for the purchase.
The downward pressure on the Aussie dollar continued, hitting a fresh 28-month low against the US dollar, with risk sentiment souring and the US Fed pushing ahead with large rate increases.
Economic
The September minutes of the RBA board meeting noted that members discussed arguments around raising rates by either 0.25% or 0.50%. No such comment was made in the August minutes.
The US central bank issued its 5th interest rate hike of 2022 raising rates by 0.75% at its September meeting. The move was unanimous amongst members. Officials also updated their forecasts, now expecting rates to rise to 4.4% by the end of the year. The Chair also said that the US housing market will likely go through a correction.
US central bank officials have also made it clear they are willing to accept a recession if it is the price of slowing the pace of inflation.
US housing starts rose from a downwardly revised 1.404 million annual rate in July to 1.575 million in August, coming in ahead of expectations. Rising rents have boosted homebuilding to the highest level in more than 36 years. However, building permits fell in August to levels last seen during the first wave of Covid.
The Bank of England delivered a second consecutive 0.50% rate increase as it continues to battle to bring inflation under control. The move was the 7th increase in a row. Six out of nine members voted for the increase, one voted for a smaller increase, whilst three others wanted a bigger increase. The committee lowered its forecast for peak inflation from 13% to 11%.
Japan intervened in the foreign exchange market on Thursday to buy Yen for the first time since 1998 in an attempt to shore up their currency as the Bank of Japan continues with very low interest rates whilst most other central banks are raising rates.
China’s commercial hub of Shanghai announced 8 infrastructure projects with a total investment of US$257 billion after the city was hit hard by covid lockdowns in April and May. The economy of China’s biggest city fell 13.7% in Q2, the worst performance among all of China’s major cities.
Chinese banks kept their main lending rates unchanged after the central bank paused its monetary easing and defended a weakening Yuan. Economists still expect a rate cut in the coming months.
Politics
Germany seized the local unit of Russian oil major Rosneft as Berlin moves to take control of its energy industry, secure supplies, and sever decades of dependence on Russia for its energy needs. The German government is also planning to inject about 8 billion Euros into Uniper as part of a historic agreement to nationalise the gas giant and stave off collapse of the country’s energy sector.
The German government has set aside billions of Euros for natural gas purchases in an effort to stave off an energy crisis since Russia cut off its supplies. Initially, 1.5 billion Euros has been set aside for gas buying, but that funding is now nearly exhausted, with the government adding another 2.5 billion euros.
The European Union has punished one of its own triggering for the first time a process that may withhold 7.5 billion euros earmarked for Hungary unless it takes steps to curb fraud and corruption. Hungarian PM Orban has been in the EU’s sights given his determination to engage with Russian President Putin.
US President Biden said the US military forces would defend Taiwan from an “unprecedented attack” in the latest pledge of support as his administration seeks to deter China from increasing military pressure on Taipei. Biden also said Washington stands by its “One China” policy and isn’t encouraging Taiwan to seek independence.
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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