Markets
Local and global shares took a little breather this week follow a strong run of late.
In local stock news, copper miner OZ Minerals’ board has agreed to a higher $28.25 per share offer from BHP which gives the company an enterprise value of $9.6 billion. The agreed offer comes after BHP first lobbed a $25 per share offer. A big premium paid but the move makes sense for both companies.
Ramsay Health Care shares gained support after the company said activity levels improved across all regions in the first quarter. The company estimated that Covid cost it $5.9 million in September, down from $44 million in July.
Incitec Pivot shares rose strongly after the fertiliser and explosives company increased its dividend and announced a $400 million share buyback after making a record $1 billion profit in the 12 months to September 30.
Aristocrat Leisure shares fell as the gaming company delivered a $948.5 million full year net profit after tax, with results in line with expectations. Revenue was up 17% and underlying profit was up 27%. Seems like the market didn’t like their forward guidance.
Pendal shares jumped after a favourable court ruling in relation to its takeover by rival Perpetual. Perpetual’s shares subsequently slumped as the court ruling made it very difficult for Perpetual to walk away from the deal.
The oil price fell this week as OPEC cut its forecast for global oil demand growth this year and next, citing economic headwinds. The news comes as the European ban on seaborne Russian crude comes into effect on December 5, meaning 1.1 million barrels per day must be replaced.
Economic
The RBA minutes of the November meeting showed the board took into account the material increase in rates in a short period of time and the lagged effects of the impact in rate rises, with the slowed pace of tightening allowing the bank to act more consistently that would support confidence.
Australian employment rose by 32,300 in October following a 3,800 decrease in September. The move saw the unemployment rate edge lower to 3.4% with a fall in the participation rate assisting. Full-time employment rose strongly.
Australian wages growth rose by 1% in the third quarter pushing the annual rate up to 3.1%. Private sector wages grew by 1.2% while public sectors wages rose by 0.6%. The moves give the RBA some further breathing room.
US retail sales came in stronger than expected, up 1.3% from the prior month despite the Fed’s aggressive rate hikes and warnings of more to come.
A key US consumer sentiment index eased in November, coming in well below expectations. Inflation expectations also edged up.
A US central bank official indicated that they’ve still got a way go before the bank stops raising rates but indicated that the size of hikes going forward could moderate. Though he cautioned that officials were not close to a pause.
US producer price inflation rose by 0.2% in October, coming in below expectations, with the annual growth rate falling to a still very high 8%.
US housing starts fell 4.2% in October, on the prior month, with September also showing falls. The October fall came in well below expectations. Hardly surprising given the 30-year fixed mortgage rate is now averaging around 7%, the highest since 2002.
US industrial production fell by October, coming in below expectations, whilst both export and import prices fell, though came in slightly better than expected.
A key US manufacturing index unexpectedly slumped in November from October’s negative result, coming in well below analyst expectations. Outside of covid lows, this is the lowest reading since 2011.
The UK economy grew 2.4% in the third quarter, on the same time last year, a drop from second quarter growth of 4.4%. The third quarter result was better than expected, though the UK is on the precipice of entering a recession spanning multiple quarters.
UK inflation accelerated to 11.1% in October from 10.1% in September, coming in well above expectations of a rise to 10.7%. The figure would’ve been even worse absent the government’s move to cap the price of household energy bills.
Chinese authorities unveiled an extensive 16-point rescue package for struggling real estate market just days after announcing twenty measures to guide officials as it eases covid-zero policies.
Politics
China has announced changes to their covid-zero policy stance some of which include shortening the time travellers must stay in quarantine, ending mass testing, and eliminating a penalty on airlines for bringing infected passengers, among other steps.
US President Biden and Chinese President Xi met at the G20 conference in signs the two sides may resume cooperation on key issues.
Russia fired a barrage of missile strikes at Ukraine that knocked out power across much of the country. Unconfirmed reports now seem to indicate that Ukrainian air defence missiles may have strayed off course hitting Polish territory near the border and killing two people.
A deal was brokered to allow exports of Ukrainian grain from the Black Sea to be extended for 120 days easing pressure on global food prices.
The UK treasurer announced a windfall tax on the “excess” profits of some electricity generators to help pay for a freeze on household energy bills. A similar levy on oil and gas firms will rise to 35% from 25%. A combination of desperation and short-sightedness.
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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