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China accelerates stimulus measures

Markets

  • Local and global equity markets were mixed this week with the US flat, Australia and Europe up, and Asian equities boosted by news of new Chinese stimulus. 

  • Chinese stocks listed in Hong Kong (accessed by foreign investors) continued their poor run pushing their discount to Chinese mainland stocks to the deepest in 15 years. 

  • In local stock news, South32 shares fell after the diversified miner reported weaker than expected production figures for the second quarter. 

  • Judo Bank shares surged after the lender focused on SMEs reported half-yearly profit before tax increased 24% to $67 million. 

  • Iluka shares rose after the critical minerals company announced it will continue to pause operations at one of its synthetic rutile mines for the rest of 2024 until demand bounces back. 

  • Oil prices rose to a four-week high supported by larger draws from US stockpiles, a drop in US output, Chinese economic stimulus, and rising geopolitical tensions. 

Economics

  • Data showed that Australian private sector activity remained in contractionary territory in January, for the fourth consecutive month. 

  • The NAB business survey showed softening Australian business conditions in December, with businesses reporting softer employment and trading conditions. 

  • Net arrivals into Australia slowed at the back end of 2023 and looked to have peaked in the middle of last year. Tourist arrivals remain well below their pre-covid peak, driven by weakness in Chinese tourists. 

  • A US central bank board member reiterated in a speech that the rate setting committee is projecting three 0.25% cuts in 2024. This is in contrast to market pricing which has 5-6 cuts pencilled in. 

  • US economic data continues to send mixed signals as existing home sales in 2023 dropped to the lowest level in 28 years; a key consumer sentiment survey rose 13% in the first half of January 2024 to its highest level since July 2021; a key manufacturing index fell in January, coming in well below expectations; whilst another survey of economic conditions improved in January. 

  • British retail sales fell 3.2% in December, coming in well below expectations, suffering the biggest drop in almost three years. 

  • The Bank of Japan kept its monetary policy setting steady while offering no clear indication over the likely timing of a potential end to their negative interest rates. 

  • New Zealand inflation figures slowed in the fourth quarter to 4.7% in line with consensus estimates but below the central bank’s forecast. 

  • A Bloomberg report cited a possible US$278 billion rescue package from Beijing as Chinese Premier Li called for more proactive measures to stabilise the Chinese equity market. 

  • China announced a 0.5% cut in the bank reserve requirement rate from February 5, with room for more easing, which will release more liquidity into the economy. Regulators also added more measures to assist the property sector.

Politics

  • Australian PM Anthony Albanese called Labor lawmakers to Canberra for an unscheduled meeting on cost-of-living pressures. The move comes as polling shows a significant drop in his support with the main issue amongst those polled being cost of living. 

  • The Labor government has announced changes to the well-planned stage 3 tax cuts that were expected to come into effect this year. The change will see high income earners receive significantly lower tax cuts, with middle- and low-income earners better off by circa $800. 

  • Florida Governor Ron DeSantis dropped out of the race to be the Republican primary nominee in the 2024 US Presidential race. It is now a two-horse race between Donald Trump and Nikki Haley, with Trump having won both of the first two primaries. 

  • Israeli Prime Minister Benjamin Netanyahu rejected a new hostage deal presented by Hamas. 

  • Turkey’s parliament approved Sweden’s accession to NATO after months of deliberations, leaving Hungary as the lone holdout to the defence alliance’s enlargement. 


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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