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Bank of England announces emergency measures

Markets

  • Global equity markets fell whilst the local equity market held up better, benefiting from being furthest removed from global issues.

  • In local stock news, OZ Minerals made a final decision to go ahead with its $1.7 billion copper-nickel mine in WA after receiving permission.

  • Ramsay Healthcare shares fell after announcing takeover talks led by US private equity group KKR had collapsed for good. The takeover price had been $88 per share at one point, with Ramsay’s shares now below $60.

  • Telstra shares rose as its main rival Optus dealt with the fallout from a massive hack of customer data.

  • AGL, Australia’s largest electricity generator said it would shut down all coal-fired generation by the end of 2034/35.

  • Premier Investments shares rose strongly after the company announced a 4.9% rise in full-year profit, record full-year dividends and a $50 million on-market share buyback.

  • Iress shares fell sharply after the financial services software company announced it expected to make as much as $9 million less in profit than previously forecast.

  • The Aussie dollar rose off more than 2-year lows against the US dollar to 65c after being down in 63c territory during the week.

Economic

  • The pace of Australian retail trade growth moderated in August, rising by 0.6% in the month, down from the 1.3% pace in July. The rise in the month was driven by food and household goods, whilst the slower pace of growth was driven by clothing & personal accessory retailing and other retailing.

  • The final 2021/22 Federal Budget outcome came in at $32 billion deficit, or minus 1.4% of GDP, significantly better than the previous government estimate of a $79.8 billion deficit, or minus 3.5% of GDP. The improvement in the deficit is due to higher company tax receipts, particularly from the mining sector, and a reduction in outgoing payments from delayed infrastructure projects and the benefits of a strong labour market.

  • Australian job vacancies fell by 2.1% over the 3 months to August, but still remain at a high level. Hospitality appears to be facing the most acute labour shortages. The fall in the 3 months was driven by a fall in private sector vacancies, whilst public sector vacancies rose by a strong 10.5%.

  • The US commerce department said the US economy shrank at an annual rate of 0.6% in Q2, confirming previous estimates.

  • There was a range of US data released this week which was mostly positive. Durable goods orders fell slightly in August. New home sales jumped almost 29% in August, whilst house prices fell September. Consumer confidence rose in September. A key manufacturing index rose in September.

  • A key US central bank official reaffirmed the bank’s resolve to bring down inflation in an interview this week, saying there’s a lot of tightening in the pipeline and that the bank is committed to restoring price stability whilst also recognising there is a risk of overdoing it.

  • 30-year fixed rate mortgages in the US reached 6.52%, the highest since August 2008. This compares with 3.1% a year ago and 3.7% in February of 2020.

  • Business surveys showed economic activity in Europe declined sharply in September.

  • The plunge in UK bond and currency markets has forced the Bank of England’s hand, vowing a fresh round of money printing (quantitative easing) to provide whatever assistance is necessary to stabilise markets.

  • The IMF and the OECD believe the UK will post the slowest growth of the G7 economies next year.

Politics

  • The crucial Nord Stream gas pipeline, which supplies most of Europe’s energy needs, was damaged by an act of sabotage, with Swedish seismologists detecting two explosions in the area where leaks appear simultaneously in the Baltic Sea. The pipelines were already out of action due to Russia turning the taps off. Speculation is rife as to who was responsible.

  • Italy looks set to have a new Prime Minister in 45 year-old Giorgia Meloni, who would be the country’s first female leader, as Italian elections delivered a strong majority to right-wing coalition.

  • Four regions within Ukraine have held elections on a path to seeking annexation to Russia. Whilst the validity of the elections is in question, it does create a potential escalation point in that once rubber stamped by Putin, he would be forced to protect those regions on the grounds of sovereignty.

  • Hong Kong scrapped hotel quarantine for inbound travellers in the most substantial move yet to end its pandemic isolation and signalled more easing is likely. Interesting in that Hong Kong would’ve sought approval from the mainland before doing so, with the move coming as the exodus of foreigners from Hong Kong continues.

  • The new British PM’s government delivered the most sweeping tax cuts since 1972, with the move further stoking inflation fears triggering a market selloff in UK assets and a plunge in the Pound. The move by the government is unorthodox versus the path the rest of world is pedalling, but it’s hard to say that path is working at this point.

Weekly market updates are written by Chris Lioutas. Chris is on the board of Peer Wealth X Futuro Investment Committee. View LinkedIn


Disclaimer: The material and contents provided in this article contains general information and does not take into account your personal objectives, financial situation or needs. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact Peer Wealth on (02) 8014 7608.


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