Markets
A mixed week for equity markets with plenty of economic data for investors to digest whilst various US central bank members made it clear they were in no rush to cut rates.
In local stock news, Lynas Rare Earths said it had been in confidential discussions with the US based MP Materials Corp. on a transaction, but the talks are currently not ongoing.
Woodside and Santos have ended merger talks which resulted in Santos shares tumbling. The move puts pressure on Santos to consider asset sales and other options to boost its valuation.
Metcash went into a trading halt after the IGA supplier said it would spend around $558.5 million to acquire a leading restaurant food vendor and two hardware chains. The deal will be partially funded via a share placement.
Nick Scali shares soared to a one-year high after the furniture retailer announced a $43 million profit in the half-year to December 31, down 29% from a year ago but slightly ahead of guidance. Revenue was down 20%, but sales have shown signs of rebounding in the last three months.
GQG Partners shares rose strongly to a record high after the listed fund manager announced it had US$1.9 billion in net inflows in January, with funds under management up US$7 billion in the same month.
Transurban shares fell after the toll road operator announced its half-year earnings were up 7.5% with traffic growth across all markets. Investors were looking for an upgrade in dividend guidance.
Oil prices rose as investors saw support from a larger than expected fall in US stockpiles.
Economic
The RBA left the cash rate on hold at 4.35% at their February meeting, as expected. The Board retained a tightening bias (ie. more inclined to raise than cut rates) and revised down their end of 2024 inflation forecast. They expect inflation to get back into the target range in the middle of 2024.
Australian retail trade rose by 0.3% in the December quarter but remains 1% lower through the year. Growth in retail spending remains weak with the volume of spend per person 0.3% lower in the quarter and a larger 3.5% lower through the year.
The value of new housing lending in Australia fell by 4.1% in December but remains 11.7% through the year. New lending to owner-occupiers drove the result, down 5.6% in the month, with investor lending falling by a smaller amount. The biggest falls were seen in SA, QLD, and NSW.
A private survey of job advertisements suggested the Australian labour market remains resilient with a survey showing a 1.7% increase in job ads.
The Australian goods trade balance came in at $11 billion in December, down from $11.8 billion in November. Exports rose by 1.8% in December and imports lifted by a larger 4.8%, with the overall trade balance up by $7 billion on the quarter.
The US Fed chair said that officials don’t have to rush to decide on a rate cut and that an interest rate cut would likely not be until the middle of the year, in contrast to market expectations.
January saw a better-than-expected US jobs report with 353,000 jobs added, well above consensus at 185,000, which meant the unemployment rate remained steady at 3.7%. This continues the trend of significant differences between actual and expected data and between first releases and subsequent revisions. Very odd.
US average hourly earnings also rose stronger than expected to be 4.5% higher on a year ago, whilst a key US consumer sentiment reading rose in January, coming in higher than expected.
A key European manufacturing index showed a very slight improvement but remained in contractionary territory. Early signs of economic improvement but still off a low base.
Consumer prices in China fell 0.8% in January, worse than expected and the steepest decline since September 2009. Producer prices fell 2.5%, marking sixteen straight months of deflation.
Politics
The US launched strikes at Iran-backed groups in the Middle East hitting Iranian-aligned factions in Iraq, Syria, and Yemen, with plans for further strikes.
China has pledged to stabilise their equity market after shares fell to a five-year low, but policymakers offered no specifics on how they plan to end the selloff.
Former US president Donald Trump said he might impose tariffs on Chinese goods of more than 60% if elected.
A US federal appeals court ruled that Donald Trump can be prosecuted rejecting his claim that a president is immune from criminal charges. The decision now moves the case to the US Supreme Court.
Warming China / Australia relations may have hit a road-block after a Chinese court delivered a suspended death sentence to Australian writer Yang Hengjun.
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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