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Increasingly unlikely rate relief spooks investors

Markets


  • Local and global equity markets fell this week as expectations for a US rate cut were pushed further out and Middle East tensions rose. 

  • In local stock news, NextDC resumed trading after completing the $937 million institutional investor portion of their capital raise. Retail component of the raising to come. 

  • Domino’s shares fell after their strategy day highlighted their ongoing struggles with their overseas operations.

  • Transurban’s traffic data showed reasonable Sydney and Melbourne traffic, but Brisbane traffic was light. A small miss versus expectations. 

  • ResMed shares fell after a further positive trial for GLP-1 drugs which could potentially reduce the number of patients with sleep apnoea. 

  • BHP and Rio released their quarterly production numbers, with BHP offering a small beat to expectations on copper and iron ore whilst marginally downgrading expectations for metallurgical coal despite a strong quarter. Rio results were slightly weaker than expected with iron ore production 5% lower than the same time last year, but they left full year guidance unchanged. 

  • Aluminium and nickel prices surged on the London Metal Exchange following new US and UK sanctions that banned deliveries of any Russian supplies produced.  

  • The US dollar rose to its highest level since November against a basket of other currencies including the Aussie. 

Economic

  • Australian employment fell by 6,600 in March following a big lift in February. The unemployment rate increased slightly to 3.8% whilst the participation rate edged lower. 

  • According to Seek, the number of applicants per job advertisement continues to march higher, with applicants per job ad up by 67% over the year. The increase in labour market competition is weighing on the growth in advertised salaries, cooling over the last five months. 

  • The US central bank chair suggested that the bank would likely need to wait longer to cut interest rates than it had previously anticipated. Markets have pushed out expectations for the first US rate cut to September, previously June. 

  • New data showed that US retail sales increased more than expected last month further suggesting the economy remains on a solid footing. February data was also revised upwards. 

  • A key US consumer confidence ready edged down in April whilst consumer sentiment also fell, coming in below expectations. 

  • US inflation expectations for the year ticked up, whilst import prices rose by 0.4% in March and export prices were up 0.3%.

  • US housing starts fell 14.7% in March whilst building permits dipped 4.3%. High borrowing rates, and the diminishing prospects of any short-term relief hampering new supply. In contrast, the median home price rose 4.8% to a record high of US$393,500. 

  • The European central bank president said the bank remains on course to cut interest rates in the near-term. European and UK inflation making reasonable inroads whilst US getting stuck. 

  • Britain’s economic output increased by 0.1% in monthly terms in February, in line with expectations. 

  • UK inflation fell from 3.4% to 3.2%, not easing as much as had been expected

  • New Zealand’s annual inflation eased to 4% from 4.7% in the first quarter of 2024, the lowest rate in nearly three years. 

  • Chinese first quarter economic growth surprised on the up, though retail sales and property were the biggest drags. 


Politics

  • Middle East tensions escalated after Iran fired a barrage of missiles and drones at Israel. The merry-go-round that is the current state of geo-politics – the US “funds” the missiles/drones Iran used, Iran warns Turkey before attacking Israel, Turkey obligated via their security pact to tell the US, who then with Israel and allies readily prepare the appropriate defences. Israel now vowing further retaliation. 

  • New NZ Prime Minister said the country needs to check government spending for it to successfully tame inflation. Finally, a leader willing to admit who and what is causing inflation – profligate government spending. 


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