Markets
Local and global equity markets were mixed this week as investors digested hawkish Fed comments and a European central bank rate rise.
In local stock news, James Hardie announced new leadership with Aaron Erter becoming its new CEO, effectively immediately, and will work out of the company’s Chicago office. The company fired its last CEO in January.
Magellan shares fell after the fund manager announced its assets under management had shrunk again in August by $1.3 billion to $57.6 billion.
Data technology company Link Group shares rose after the ACCC announced it would not oppose their acquisition by Canada’s Dye and Durham.
Mineral Resources share price rose strongly with the company confirming they are considering a separate listing of their lithium business.
The US dollar index hit fresh 20-year highs on a decline in US jobless claims and recent hawkish statements from the Fed. The move put continued downward pressure on the Aussie dollar.
Oil prices fell to the lowest level in 7 months as a strong US dollar and Chinese demand concerns provided downward pressure.
Economic
The Reserve Bank of Australia raised the cash rate by 0.50% at their September meeting to 2.35%, largely as expected. A fairly balanced statement followed with a strong commitment to bringing inflation under control whilst also some awareness that a lot of heavy lifting has already been done and global risks are rising. The key question now is whether we see smaller rate hikes from here to see the year out.
The Australian economy grew by 0.9% in the June quarter, up from a downwardly revised 0.7% pace in the March quarter, but below expectations for growth of 1%. Consumer and government spending drove much of the growth, the trade surplus assisted, whilst business investment detracted. The data doesn’t reflect the lagged effect of significant RBA rate increases.
The Australian trade surplus narrowed to $8.7 billion in July from a record high of $17.1 billion in June. Total exports fell by 9.9% driven by lower coal and iron ore exports, whilst total imports rose by 5.2% driven by strong domestic consumer demand and Australian’s travelling overseas.
Australia will produce another huge wheat crop this season with growers on track to harvest 32.2 million tonnes in 2022-23, just shy of last year’s all time high of 36.3 million tonnes, with favourable winter weather conditions helping.
Australian company profits rose by 8.6% in the June quarter whilst wages and salaries rose by a sharp 3.3%, reflecting both rising employment, hours worked and rates of pay.
US exports of crude oil and other refined products are setting new records topping 10 million barrels a day in August, filling the supply void left by Western sanctions on Russian oil.
The US Labor Department said the economy added 315,000 jobs in August, roughly in line with economist forecasts, whilst wage growth came in below expectations. Labour force participation also rose more than expected. The data helped sooth fears of a slowing economy whilst lower wage growth helped with inflation concerns.
The European central bank raised interest rates by 0.75% in order to tackle record inflation, despite fears the Eurozone is already heading into recession because of soaring energy prices. The move lifts the bank’s rate to the highest level since 2011.
Chinese trade data showed outbound shipments rose 7.1% from a year earlier in August, slowing from an 18% increase in July. Imports increased 0.3% from a year earlier, down from 2.3% growth in July.
Global food prices fell for a 5th month after demand for some products weakened whilst also assisted by a seasonal uptick in supplies. The most recent falls will offer some relief to consumers but aren’t as big as the falls we saw in July, whilst food remains more expensive than it did a year ago.
Politics
Europe has moved a step closer to blackouts, energy rationing and severe recession after Russia’s Gazprom said its key gas pipeline to the continent won’t reopen as planned. The move comes after the Group of Seven nations said they plan to implement a price cap for global purchases of Russian oil.
The US government told US semiconductor chip manufacturer Nvidia to halt all China-bound exports of two computing chips crucial to developing artificial intelligence (AI). The move is another escalation point between the two nations and could severely limit China from advancing its AI capabilities.
Liz Truss won the race to become the leader of the Conservative party and will become Britain’s prime minister. The foreign secretary beat her rival Rishi Sunak in a ballot of Conservative party members after a long 7-week contest to succeed Boris Johnson.
The large Chinese city of Chengdu has extended its lockdown, confining people to their homes and subjecting them to daily tests. The city of 20 million people recorded 121 cases early in the week. Another 8 cities have been put on alert.
Queen Elizabeth II has died at the age of 96, after more than 70 years on the throne, with her death marking the end of Britain’s longest reigning monarch. Her eldest child, Charles, will be formally proclaimed King Charles III.
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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