Markets
Local and global equity markets were mixed this week as investors digested a wide range of economic data.
Chinese equities rallied on rumours that China is preparing to loosen covid restrictions in March 2023 with reports that a “reopening committee” has been formed.
In local stock news, medical device maker ResMed announced that its revenue grew 5% to $950 million in the September quarter, compared to a year ago.
Vicinity Centres reaffirmed guidance and announced first quarter visitations rose to 86% of 2019 levels, with people spending 1.3 times as much per visit.
Graincorp shares rose again to a 3-month high as grain prices continued to surge following Russia’s withdrawal from a deal that let Ukraine export grain via the Black Sea.
Data showed that US oil output climbed to nearly 12 million barrels per day in August, the highest since the beginning of covid.
Oil prices rose on the back of rumours regarding China relaxing covid restrictions, with any reopening likely to result in a surge in demand.
Economic
The RBA board increased the cash rate by 0.25% to 2.85% as expected at its November meeting. The RBA now expects inflation to peak at 8% later this year and not get close to their target band until 2024. They have also downgraded their economic forecasts for 2023 and 2024.
The Australian trade surplus came in at $12.4 billion in September, coming in significantly above consensus and a lift on the August balance which was upwardly revised to $8.7 billion. Exports rose by 7% (iron ore, gas) in the month whilst imports rose by just 0.4%.
The Australian Bureau of Statistics reported that Australian iron ore exports dropped in the September quarter for the first time since 2020. Softer demand for ore from China led to a 16.9% drop.
Australian residential building approvals fell by 5.8% in September. New lending for housing dropped by 8.2% and is now 22.3% lower than the peak in May 2022, with the September reading coming in well below expectations.
Australian dwelling prices fell by 1.1% across eight capital cities in October. Prices are down by 6.5% from their April 2022 peak. The biggest falls in October came from Sydney, Melbourne, and Brisbane. Home prices in regional Australia are down 4.9% from their June peak.
Australian retail trade rose by 0.6% in September, with food retailing and eating out driving the increase. The rise was above consensus of a 0.4% lift. ACT, WA, NT, and QLD saw the strongest growth. Retail trade remains at record high levels, 16% higher than its pre-covid trend and 17.9% higher than a year ago.
Australian private sector credit rose by 0.7% in September with both business and housing making positive contributions. Business credit remains resilient with another very strong monthly lift of 1.3%. Personal credit was flat in the month.
The US central bank raised rates by 0.75% as widely expected. However, the chair’s statement had the market in fits and starts as it liked the rhetoric regarding a potential slowdown in the size of rate rises but didn’t like the rhetoric regarding potentially having to raise rates for longer.
US job openings came in higher than expected, jumping to 10.7 million and stoking fears the US Fed may have to go harder or longer on rate rises.
US private sector employment rose by 239,000 through the middle of the month, from 192,000 a month earlier. September’s figure was revised down from an originally reported 208,000.
A range of US data showed that personal income rose by 0.4% in September whilst personal spending rose by 0.6%. The employment costs index rose by 1.2% in the September quarter. The broad trend across the labour market appears to be weakening.
Two key manufacturing data points showed further contraction in US manufacturing, with another data point showing the lowest reading since May 2020.
The Bank of England lifted their cash rate by 0.75% to 3%, its biggest rate rise since 1989, as it battles the highest inflation in 40 years.
Politics
Brazil has a new leader in Luiz Inacio Lula da Silva after he beat incumbent Jair Bolsonaro in Brazil’s presidential election. The result was close with Lula winning with 50.9% of the vote and Bolsonaro failing to accept defeat immediately after counting had ended. He has since conceded defeat.
US President Biden vowed to impose higher taxes on petroleum companies that post record profits without reinvesting in domestic production.
Russia agreed to resume a deal allowing safe passage of Ukrainian crop exports, abruptly reversing course after Turkey and the United Nations pushed ahead with the shipments over Moscow’s objections.
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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