Markets
Local and global equity markets moved higher this week as bullish bets increased on central banks nearing the end of their rate hiking cycle.
In local stock news, Healius shares fell after the imaging and pathology operator declined to comment on an article saying it would sell its day hospitals to QIC for $140 million.
Harvey Norman shares fell despite the electronics and furniture retailer announcing solid first quarter sales growth in Australia and even better numbers in Malaysia.
Bluescope Steel shares rose as the company confirmed its guidance of first-half earnings of $800-900 million.
Virgin Money UK, previously National Australia Bank’s UK operations, shares soared on strong results and guidance with the bank enjoying the benefit of higher rates while not seeing any real distress from consumers yet.
Qantas shares rose strongly to its highest level since before covid as the company announced it expects to make $150 million more this half than previously predicted as travel demand remains strong.
Oil prices fell as conflicting reports about whether Saudi Arabia and other OPEC oil producers are considering a 500,000 barrels per day out increase. The report was subsequently denied with the Saudi energy minister confirming that the cut of million barrels per day by OPEC+ continues until the end of 2023.
Economics
RBA Governor Lowe spoke at a dinner saying the board is remaining flexible with their policy path and will adjust that path as necessary. He said they haven’t ruled out returning to 0.50% increases if necessary nor have they ruled out keeping rates unchanged for a time.
Meeting minutes from the US central bank showed that most central bank officials back a slowing in the pace of interest rate hikes.
A range of US data was released with durable goods orders rising by 1% in October, the S&P global manufacturing index fell into contractionary territory in November whilst the equivalent services index also fell. A key consumer sentiment index fell in November but came in higher than expected.
Eurozone consumer confidence rose in November, with the highest reading since August, but remains deeply in negative territory.
European central bank officials made statements on rates with some suggesting a third straight 0.75% increase was required whilst others suggested that a 0.50% increase would still send a strong message. The latest meeting minutes showed policymakers feared that inflation may be getting entrenched.
German producer prices posted their first monthly fall in 2.5 years in October, down 4.2%, and well below market expectations for a 0.9% rise. On the same time last year, prices are up 34.5%. The October decline was led by the energy segment, but this remains up over 85% since October 2021.
Germany’s business climate index rose in November helped by several government stimulus packages, filled national gas reserves, and a faster adaption of businesses and households to conserving less energy.
UK retail sales rose 0.6% in October following a 1.5% fall September, beating analyst expectations of a 0.3% rise. On the same time last year, sales are down 6.1% with retail volumes still below their pre-covid levels.
Politics
Rising covid cases in China caused some concern that the country’s reopening may be over before it even began, after several cities moved back to stay-at-home orders and increased testing.
The US Secretary of Defence has urged China to avoid destabilising actions toward Taiwan in his first meeting with Defence Minister Wei Fenghe. He also called for both sides to maintain open communication.
Russian gas companies have threatened to cut gas to its pipelines running through Ukraine, the last remaining route bringing Russian gas to Western Europe. At the same time, the European Union has watered down its latest sanctions proposal for a price cap on Russia’s oil exports.
Workers at the largest US rail union voted against a contract deal reached in September raising the possibility of a year-end strike that could cause significant damage to the economy and strand vital shipments of food and fuel.
The Ukrainian President has demanded the UN punish Russia for air strikes on civilian infrastructure after a missile barrage caused the worst nationwide power outages yet.
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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