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Falling US inflation buoys investor sentiment

Markets

  • Local and global equity markets surged higher with investors buoyed by cooling US inflation potentially bringing forward expectations of US rate cuts.

  • In local stock news, fund manager GQG Partners shares rose after the company announced a further US$6.2 billion in funds under management, taking their total to US$104 billion.

  • Megaport shares surged after the internet connectivity company upgraded its earnings guidance range for the last financial year.

  • InvoCare has given private equity firm TPG Capital another week to firm up their $13 per share takeover for the funeral home business.

  • Diversified mining and manufacturing company Incitec Pivot confirmed it is considering selling off its fertiliser business sending shares higher.

  • Viva Energy said fuel sales in the first half are expected to climb but refining margins will nearly halve.

  • The oil price rose to the highest level in over two months as major crude exporters Saudi Arabia and Russia clamp down on supplies. Sentiment also rose on future demand as US inflation cooled faster than expected and on expectations of more Chinese stimulus.

  • The Aussie dollar rose strongly on US dollar falls as US inflation came in lower than expected.

Economic

  • The RBA has a new governor in Michele Bullock, with the government following the traditional path of appointing from within. The RBA has confirmed that they will only meet eight times a year instead of the current eleven times, starting in February.

  • Total Commonwealth Bank credit & debit card spending rose by 0.8% in June, to be 8.9% higher than a year ago, with another strong month for services spending. Spending has clearly slowed from 2022 levels but remains elevated.

  • Australian consumer sentiment rose by 2.7% in July but remains at deeply pessimistic levels.

  • US business conditions held steady in June in positive territory whilst confidence rose to zero (neither positive nor negative). Small business optimism rose in June.

  • US inflation data showed that consumer prices rose 3% in June from a year earlier, the slowest pace in more than two years. Core inflation rose 0.2% from May with economists expecting a 0.3% increase. Headline inflation is falling fast whilst core inflation is taking longer to fall back to target as expected.

  • The US economy added the fewest jobs in 2.5 years in June, with 209,000 jobs added in June versus expectations of 230,000. The unemployment rate eased from 3.7% in May to 3.6% in June with the participation rate steady. Average hourly earnings rose by 0.4% in June to be up 4.4% on a year ago.

  • US consumer inflation expectations for the year ahead fell from 4.1% in May to 3.8% in June, the lowest since April 2021 whilst also coming in under expectations.

  • US consumer credit grew by US$7.24 billion in May versus expectations of US$20 billion, the slowest pace since November 2020.

  • UK wages grew by a record annual rate of 7.3% in the three months to May, with markets now fully pricing in a 0.50% hike from the Bank of England in August.

  • Britain’s economy shrank less than expected in May, with economic output down by 0.1%, after growth of 0.2% in the prior month.

  • Chinese travellers are staying home amid a slower than expected economic recovery which has seen the population hesitant to spend money abroad. This has also heavily impacted tourism in South-East Asian nations.

  • China’s consumer inflation rate was flat in June whilst factory gate prices fell further, fuelling concerns about deflation risks and adding to speculation about upcoming economic stimulus.

  • Beijing’s latest supportive measures for the property sector saw the announcement of new loan-relief measures for companies, but they may be still too small to revive the sector.

  • China’s exports fell 12.4% in June from a year earlier, the second straight month of declines and the biggest drop since early 2020. Exports to the US alone fell almost 24%, the 11th straight month of declines. Imports also fell.

Politics

  • Australian Trade Minister Don Farrell is heading to Brussels for talks with European Union counterparts in a bid to seal their free trade deal. Farrell had previously said the EU failed to offer satisfactory terms on the deal. The EU was Australia’s fourth-largest trade partner in 2022.

  • The UK will join Australia in the wide-reaching Asia Pacific trade agreement known as the CPTPP from next weekend, becoming the first new member since the framework came into force in 2018.

  • The Dutch PM’s job is on the line as he prepares for a no-confidence vote after his coalition was dissolved last week amid infighting over migration policy. The PM will likely remain in care-taker role until elections in November at the earliest.

  • Turkish’s officials said they will ask their parliament to advance Sweden’s bid for membership in the NATO alliance after receiving assurances on key demands.

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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