Equities higher on solid economic data

Markets

• Local and global equity markets continued their upward momentum on confirmation that central banks are coming to the end of their rate hiking cycles with smaller rate hikes on the card.

• In local stock news, insurance companies including IAG and Suncorp have received thousands of claims due to the flooding in and around Auckland. Both companies expect claims to rise.

• ResMed shares fell during the week as the market struggled to digest its second quarter earnings report which showed that costs and foreign exchange translation has pressured margins. Revenue remains strong and ahead of expectations.

• Tech stock Megaport shares plunged after the communications infrastructure provider announced that new services sold during the December quarter were less than half what analysts had expected.

• Flight centre shares rose to a four-month high after the travel company’s shares resumed trading following a $180 million capital raising to fund its acquisition of UK-based luxury travel brand Scott Dunn.

• The oil price fell after a report showed a big build up in US oil inventories.

Economic

• Australian retail trade fell by 3.9% in December, coming in well below expectations, with large declines in all categories except food retailing and eating out. Spending at department stores fell sharply as did clothing, footwear and personal accessory retailing. Household goods retailing and other retailing also saw large falls. By state, VIC and WA saw the biggest falls.

• Australia’s underlying budget deficit for the six months to December 2022 was $14.7 billion, an $11.5 billion improvement on the deficit profile from the October 2022 Budget. The headline deficit also improved. Government receipts boosted the result with a $6.5 billion improvement in taxation receipts and government spending running lower than expected.

• Australian private sector credit growth rose in December but came in at the slowest monthly pace since February 2021. Whilst the pace of annual growth remains high, the pace of housing and business credit growth are easing quicker than expected.

• Australian dwelling prices fell by 1.1% across the eight capital cities in January, with prices now down almost 9% from their April 2022 peak. Prices fell the most in Sydney, Melbourne, Brisbane, and Adelaide, with Sydney house prices now down 15% since January 2022.

• The US central bank delivered an expected 0.25% rate increase, flagging more to come. However, the chair acknowledged that the bank’s interest rate increases had begun to pull inflation lower saying the “disinflationary process has started” but pushed back against the idea that they would consider cutting rates this year.

• A key US employment report showed that the US private sector added 106,000 jobs in January, well below the 190,000 jobs economists had expected.

• The US 4th quarter employment cost index fell, coming in below expectations with the slowest growth since the fourth quarter 2021.

• US inflation rose in line with expectations, with 12-month consumer inflation expectations falling to a 21-month low of 3.9% in January.

• US house prices fell in November, whilst consumer confidence also fell but remained at elevated levels.

• In other US data, personal income rose 0.2% in December and spending fell 0.2%, pending home sales rose by 2.5% coming in above expectations, consumer sentiment rose in January but came in below expectations, whilst a key manufacturing activity index missed expectations by falling in January reflecting a second straight contraction after 30 months of expansion.

• The European central bank raised rates by 0.50% to 2.50%, the highest level since November 2008, whilst the Bank of England did the same taking their rate to a 14-year high of 4%.

• The Eurozone economy grew by just 0.1% in the fourth quarter whilst annual consumer prices in the region fell to 8.5% in January (below expectations) from 9.2% in December.

• In other European news, Spanish consumer prices rose by a higher than expected 5.8% in January, due to higher fuel prices. Germany’s economic growth was negative in the December quarter, coming in below expectations, whilst retail sales fell 5.3% in December.

Politics

• The US unveiled new sanctions aimed at weakening Russia’s ability to continue the war in Ukraine. These new sanctions included targeting a Chinese company that allegedly provided satellite imagery to pro-Russia mercenaries.

• Japan and the Netherlands have joined the US to limit China’s access to advance semiconductor machinery, which will make it more difficult for the Chinese government to build its own domestic chip capabilities.

• The Biden administration is considering cutting off Huawei from all its American suppliers as the government intensifies a crackdown on the Chinese tech sector.

• Up to half a million British teachers, civil servants, and train drivers walked out over a pay dispute in the largest coordinated strike action for a decade, with unions threatening more disruption.

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.