Markets
Local and global stocks had a mixed week as investors digested company reporting and continued talk from central bankers pushing back on early rate cut hopes.
In local stock news, CSL shares fell sharply after the company announced that a treatment it had spent two decades and almost one billion dollars developing didn’t appear to prevent secondary heart attacks. The company posted a half-year net profit of $1.9 billion, up 20% from a year ago.
BHP shares fell after the company said it would take a $3.9 billion non-cash impairment on the carrying value of its WA nickel operations, given the sharp fall in nickel prices.
Macquarie Group’s profit fell due to reduced activity in its commodities and global markets business, while the long-standing head of the division will step down later this month to pursue other opportunities. Macquarie talked to softer conditions for M&A and deal flow ahead.
CAR Group (carsales.com) shares rose after meeting first half earnings expectations while guiding for strong growth.
ANZ Bank provided a quarterly trading update with earnings slightly beating expectations driven by solid trading revenue and another period of low bad debts.
James Hardie shares fell after the company reported third-quarter earnings of $234 million, slightly above consensus estimates but disappointing traders.
Breville shares fell after the company posted a 6.7% rise in half-year net profit, with a softer than expected set of first-half numbers on both revenue and profit, but a strong margin result.
Treasury Wines delivered a good result relative to low expectations from the market, with earnings coming in at $290 million on better-than-expected revenues.
Downer shares rose strongly to a fourteen-month high after the company delivered a first-half profit up 3.8% from a year ago. Cost control and cash conversion came in ahead of expectations.
Dexus shares fell despite a better than expected first half from Australia’s largest office landlord, with earnings 5% ahead of expectations with a solid dividend declared. Office occupancy nationally was 94.5% down slightly from June while incentives fell.
South32 shares fell after the company reported higher costs on operations, financing, and capital expenditure even though their first half result was broadly in line with expectations.
Economic
The Australian unemployment rate increased to 4.1% in January, a reasonable rise from the 3.6% reported back in September 2023. Employment rose ever so slightly in January after a large fall in December, whilst the participation rate was flat.
RBA governor Michele Bullock told the House Economics Committee that an inflation with a “4” in front of it is not good enough and is still some way from the midpoint of their target.
Australian consumer confidence increased by 6.2% in February but remains weak. In contrast, business conditions continued to ease but remain at the long run average in January.
US central bank members continue to push against early rate cuts seeing no urgency to cut rates and are focused on returning inflation to target. The market is now pricing a 53% probability of a first rate cut in June.
US retail sales fell 0.8% in January coming in below expectations. Import prices rose as did export prices, with both coming in above expectations, whilst industrial production fell.
Two key US manufacturing indices rose in February with both coming in significantly better than expected.
US consumer inflation expectations for the year ahead were unchanged at 3% in January, remaining at the lowest levels in three years.
US inflation rose by 0.3% in January, coming in above expectations to be up 3.1% on the year. Core inflation rose by 0.4% which was the biggest lift in eight months, with the annual rate steady at 3.9% but above expectations.
UK data showed inflation unexpectedly held steady in January at an annual rate of 4%, easing fears of an increase, with food prices finally falling again.
Britain’s economy fell into recession in the second half of 2023, with the economy contracting by a worse than expected 0.3% in the December quarter.
The Bank of Japan governor said that financial conditions will remain easy even if they were to end negative interest rates.
Japan’s economy grew 1.9% in 2023, despite some weakness in the December quarter, whilst improving on the 1% growth in 2022.
Politics
The European Union proposed trade restrictions on more than twenty firms, including three Chinese companies, for allegedly supporting Russia’s war efforts in Ukraine.
The US rejected Russian President Vladimir Putin’s suggestion of a ceasefire in Ukraine.
German direct investment in China rose by 4.3% to a record high 11.9 billion Euros last year. The news confirms German firms continue to invest heavily in China despite the German government’s pleas for them to reduce exposure.
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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