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US central bank flags one rate cut for the year

Markets

  • Equity markets were mixed this week with investors comforted by the better-than-expected US inflation print, disappointed by the Fed’s forecast of only one rate cut this year and concerned regarding European Union election results which saw France call snap elections. 

  • In local stock news, Woodside announced it had achieved first oil from its Sangomar field off the coast of Senegal, the West African country’s first offshore oil project. 

  • Bapcor shares soared as the under-siege auto parts retailer confirmed it had received a tentative takeover offer from Bain Capital at $5.40 per share, valuing the company at $1.8 billion. 

  • Nine Entertainment confirmed chairman Peter Costello has stepped down following an altercation with a journalist last week. 

  • CSR’s takeover by French Saint-Gobain has received foreign investment review board approval

  • Adbri (formerly Adelaide Brighton) shareholders approved its $2.1 billion takeover by Ireland based building company CRH. 

  • ASX Limited shares fell sharply after the company flagged higher costs and higher capital expenditure whilst pushing out return targets. 

  • Oil prices rose this week on reports of a stronger demand outlooks from multiple sources. There was also speculation that the US would start to rebuild their strategic petroleum reserves which have been drained quite considerably by the current administration. 


Economic

  • Australian employment growth was broadly in line with expectations in May, with the unemployment rate falling to 4%. Employment rose by 39,700, with full-time employment adding 41,700. 

  • The US central bank held interest rates steady at 5.25-5.50%, noting there had been modest progress on hitting their inflation target of 2%. They pencilled in one rate cut for this year, with market pricing still expecting two. 

  • US employment data was stronger than expected in May, both job growth and average hourly earnings, pushing out market pricing for the US central bank’s first rate cut. 

  • The US consumer price index showed prices rose 3.3% from a year ago in May, down slightly from April’s reading and lower than the 3.4% expected. Annual core inflation fell from 3.6% to 3.4%, its slowest pace in three years. 

  • US producer prices fell 0.2% in May from the prior month, surprising economists who had predicted a rise. Annual producer prices rose 2.2%, coming in well below expectations. 

  • US consumer inflation expectations for the year ahead declined slightly in May from April

  • A key US small business optimism index rose in May, coming in above expectations of no change in the reading. 

  • The British unemployment rate rose to 4.4% in April from 4.3% in March, coming above expectations. 

  • India’s inflation eased to 4.7% in May, coming in below market expectations of 4.9%. 


Politics

  • French President Emmanual Macron called a snap election following European Union parliamentary elections which saw incumbent parties trounced in favour of right-wing parties and candidates. The snap election strategy is designed to panic opposition parties, giving them limited time to ready potential candidates and form coalitions. 

  • The European Union will impose additional tariffs on electric cars shipped from China starting next month, taking levies to as much as 48%. 

  • NZ is pressing ahead with plans to lift a ban on offshore petroleum exploration, citing energy security challenges.

  • Premier Li Qiang will become the most senior Chinese leader to visit Australia in seven years when he touches down on the weekend. 

  • The Biden administration is considering further restrictions on China’s access to chip technology used for A.I. The measures being discussed would limit China’s ability to use cutting-edge chip architecture, with the US goal to make it harder for China to assemble sophisticated computing systems needed to build and operate A.I. models. 

  • Presidential hopeful Donald Trump has promised to lower the corporate tax rate to 20%, according to people at a private meeting in Washington, pitching the support to about 100 CEOs of some the largest US companies. 



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