Local and global equity markets were weaker this week as some US technology earnings disappointed whilst concerns rose regarding more central bank rate hikes.
The US 10-year government bond yield has now risen more than 1%, to a 16-year high since the US central bank last raised rates in July. Whilst big moves in long-dated government yields are becoming the norm in the most recent cycle, long term historical data shows how extreme these moves are.
In local stock news, Treasury Wine Estates shares rose after the Australian government announced that China had agreed to review their tariffs on Australian wine it imposed three years ago.
Lynas shares soared after the rare earth miner said the operating license for its Malaysian processing plant had been extended through March 2026, with Lynas agreeing to invest in developing methods to better process waste from the plant.
Corporate Travel Management shares rose after the company announced a $100 million share buyback program, with their chairman telling the company’s annual meeting that it sees growth appetite for corporate travel.
Ampol shares rose strongly after the petrol station owner said strong jet fuel sales had helped boost third-quarter earnings by 65% to $438.2 million.
Dexus shares fell as the office tower owner announced Darren Steinberg would step down as CEO next year, after 11 years in the role.
The oil price fell this week as demand fears rose, even with tighter US supply and concerns mounting on Middle East supply.
Australia’s inflation rate fell to 5.4% on the same time last year in the September quarter, down from 6% in the previous period, but above market forecasts of 5.3%. Both goods and services inflation fell. This was the third quarter in a row of lower annual inflation but shows the pace of inflation falling may be slowing, bringing RBA rate hikes back into the fold.
Australian export prices fell by 3.1% in the September quarter driven by large falls in prices of rural goods, fertilisers, and coal. Import prices rose by 0.8% in the quarter, driven by petroleum products. The fall in export prices will lead to another fall in the terms of trade.
The US economy expanded at annualised 4.9% in the third quarter, the most since the last quarter of 2021, and above market forecasts of 4.3% and above the 2.1% expansion in the June quarter. Consumer spending rose strongly whilst exports also soared, coming in above a strong rise in imports. Residential investment rose for the first time in nearly two years and government spending increased faster.
The US central bank chair has suggested the bank is likely to hold interest rates steady at their November meeting but will leave open the possibility of a future rate hike if data doesn’t continue to move in the right direction. He also highlighted the continued signs of strength in the economy and that recent rises in bond yields may have reduced the need for another rate hike.
US manufacturing activity rose in October, coming in ahead of forecasts, and reaching its highest level in six months. Suppliers running down inventories and continued soft demand conditions led firms to cut their input buying for the fifteenth month.
The European central bank kept interest rates unchanged at multi-year highs during its October meeting, a shift from the bank’s fifteen-month streak of rate hikes, moving to a more cautious watchful stance.
Euro area manufacturing activity fell in October to the lowest levels in three months whilst also coming in below expectations. New orders received fell sharply again, firms reduced employment for a fifth consecutive month, and input prices were down for the eighth consecutive month.
The Chinese central bank held their lending rates steady in October. The loan rate which is used for corporate and household loans remains at a record low of 3.45% and the reference rate for mortgages was maintained at 4.2% for the fourth straight month.
Hong Kong’s property developers are selling homes at deep discounts with the current buyer’s strike so strong that even deeply discounted foreclosure auctions attract few bidders.
Chinese President Xi stepped up support for the economy issuing additional debt, raising the budget deficit ration, whilst also making an unprecedented visit to the central bank.
An Israeli ground assault into Gaza remains on pause with security officials signalling their readiness to launch a weekend offensive. Reports show that a US guided missile destroyer has shot down three missiles and several drones launched by Houthi forces in Yemen.
US politics finally got its act together with a new speaker of the House being agreed on and appointed in Mike Johnson, a Republican congressman from Louisiana. The House can now get back to doing what they were appointed for, ie. actually legislating.
India is rejecting pressure from Russian oil suppliers to pay for crude oil imports using Chinese currency as tensions between Indian and Chinese officials continue to simmer.
Australia and China have agreed to suspend their dispute on wine at the WTO, pending a review on wine tariffs which is expected to take five months.
China has announced plans to restrict exports of graphite, an important electric vehicle battery component, in retaliation for new US limits on semiconductor exports.
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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