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Markets fall as US inflation print disappoints

Markets

  • Local and global equity markets fell this week after the US inflation rate fell, but at a slower pace than expectations putting additional pressure on the US central bank.

  • In local stock news, Atlas Arteria shares fell after a stoush appeared to be developing between the toll road operator’s board and a superannuation fund manager (IFM) that owns a 20% stake in the company. The dispute came after Atlas Arteria confirmed that it was participating in the sale process for a US toll road operator, with IFM demanding that it withdraw from the bidding or face a board spill.

  • The Star Entertainment Group entered a trading halt this week in advance of the release of a report into the company’s fitness to hold a NSW casino license.

  • Ramsay Healthcare’s shares fell sharply to a 6-month low after a consortium led by leading private equity firm KKR walked away from its nearly $30 billion takeover offer for the private hospital chain.

  • A regulator’s ruling in the UK saw Link Group’s shares fall sharply and potentially put their pending $2.5 billion acquisition in jeopardy by Canada’s Dye & Durham. Link shares fell to a 3-month low after the regulator said that a Link subsidiary could be forced to pay up to $519 million to redress investors in a collapsed UK investment fund.

  • Rio Tinto and China Baowu Steel Group will spend $3 billion on the Western Range iron project in the Pilbara region to start delivering 25 million tonnes a year by 2025. If approved, the project will start in 2023 and will support 1,600 jobs.

  • Oil prices fell this week on rising recession fears and expectations for soft Chinese demand to continue. However, oil prices rose early in the week after the International Energy Agency said it expects widespread switching from gas to oil for heating purposes, saying it will average 700,000 barrels per day in October 2022 to March 2023, double the level of a year ago.

  • The Aussie dollar continued to fall against the US dollar with downward pressure supplied by continued strength in the US dollar, rising global recession fears, and slight tick up in the Australian unemployment rate.

Economic

  • The Australian unemployment rate ticked up to 3.5% in August, with employment rising by 33,500, only partly reversing the 41,000 decline in July. The participation rate increased slightly. Full time employment rose 58,800, but remained below the June peak, whilst part-time employment fell 25,300.

  • Australian consumer sentiment rose 3.9% in September, the first rise since November 2021. Four of the five subcomponents rose in the month. However, levels are still negative and consistent with historical major economic disruptions.

  • Australian business confidence and conditions rose in August showing surprising resilience, reflecting the strength in the Australian economy in recent months as the lagged impact of interest rates hikes means rate rises delivered so far have had limited impact. Supply challenges remain evident.

  • US inflation eased for the second straight month to 8.3% in August, the lowest in four months, but above market forecasts of 8.1%. The energy mix remained elevated but smaller increases were reported, whilst inflation rose for food, shelter, and used cars and trucks. The core reading, which excludes volatile energy and food, increased 6.3% on the year. The result all but guaranteed a 0.75% increase by the Fed at their next meeting whilst also pushing up probabilities of a 1% increase.

  • US producer prices fell 0.1% in August, following a 0.4% drop in July and in line with forecasts. Prices of goods went down 1.2%, led by a large drop in gasoline prices. On the same time last year, producer prices are up 8.7%.

  • The Euro area economy expanded 4.1% in Q2 on the same time last year, higher than the 3.9% in the estimate. Second half economic growth is likely to look very different.

  • The UK unemployment rate fell to 3.6% in the three months to July, the lowest level since 1974, as the participation rate fell. The so-called inactivity rate rose to 21.7%, the highest since 2017, driven by students and long-term sick. Average weekly earnings increased by 5.5% on the same time last year. However, when adjusted for inflation, total pay fell 2.6%.

  • The UK annual inflation rate unexpectedly edged lower to 9.9% in August, from 10.1% in July and below market forecasts for a 10.2% reading. It was the first time in 11 months that inflation eased, with motor fuels assisting.

  • The German annual inflation rate was confirmed at 7.9% in August, again reaching its highest level since the 1990s reunification. Prices rose faster for food whilst energy costs remained elevated. On a monthly basis, consumer prices went up 0.3%, easing from 0.9% growth in July.

Politics

  • Chinese Premier Li Keqiang called for more policies to lift consumption as new figures showed a further plunge in travel and spending more recently amid tight Covid controls.

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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