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US inflation disappoints rate cut hopes

Markets

  • A flat to slightly weaker week in local and global equity markets. 

  • In local stock news, Virgin Money UK shares soared after the UK’s sixth largest bank (spun-off from NAB) looked likely to be taken over by Nationwide building society for $5.6 billion that would remove the listing from the ASX. 

  • Alumina shares rose strongly after the company signed a binding deal to be acquired by Alcoa, the US aluminium giant and its joint venture partner, in an all-shares transaction. 

  • Metcash held their investor day with the trading update better than expected with total sales up 0.9% for the first ten months of the financial year. 

  • Treasury Wines shares rose on a draft determination from China that strongly implies wine tariffs will be removed. 

  • The iron ore price continued its downward trajectory, down 25% from the peak reach in January. Concerns regarding the outlook for China have led the decline. 

  • Global oil prices rose to four-month highs at the International Energy Agency predicted a tighter market in 2024 and raised its view on oil demand growth this year. 

  • The Australian dollar dipped slightly on US dollar strength as US inflation remained robust. 

Economics

  • Net arrivals into Australia picked up pace again in January and February after dipping in late 2023. The increase has been driven by student arrivals, whilst there has also been a lift in net permanent arrivals. 

  • National Australia Bank’s monthly survey of 500 companies showed business conditions rose last month, with trading conditions and profitability lifting. In contrast, confidence and forward orders remain at low levels. 

  • The Commonwealth Bank Household Spending Insights data for February showed a 0.3% fall in February after a 3.2% lift in January. The index last peaked in November 2023. 

  • The US consumer price index rose by 0.4% in February, in line with expectations, but the annual growth rate rose from 3.1% to 3.2%. Core inflation, ex-food and energy, also rose 0.4% in the month. 

  • US and European central bank presidents struck a more dovish stance in recent speeches, but both need more data before they can confirm rate cuts are on the table, with June looking most likely given current trends in data. 

  • US producer prices rose 0.6% in February from the prior month, well above the 0.3% increase expected. 

  • US non-farm payrolls for February showed a strong increase in jobs by 275,000, beating expectations. However, the unemployment did rise to 3.9% making it a slightly mixed report. Conditions remain strong but signs of weakness are emerging. 

  • US consumer inflation expectations for the year ahead remained steady at 3% in February. Whilst holding at three-year lows, this is too high relative to the Federal Reserve’s inflation target. Three and five-year inflation expectations also rose. 

  • The UK economy returned to growth, with GDP growing 0.2% in January which was in line with expectations. 

  • British wages excluding bonuses grew at their slowest pace since October 2022 during the three months to the end of January whilst the unemployment rate edged up unexpectedly. 

  • China’s consumer prices rose for the first time since August. The consumer price index increased 0.7% in February from a year earlier, helped by the Lunar New Year holiday. In contrast, producer prices fell 2.7% continuing the longest string of declines since 2016. 

  • The Chinese government has pledged government funds to encourage consumers and businesses to replace old equipment and goods, as it puts in place support measures to aid in hitting their 5% economic growth target this year. 

  • Indian inflation was little unchanged last month, remaining a little over 1% above the central bank’s inflation target of 4%.


Politics

  • India and four European countries (Switzerland, Norway, Iceland, Liechtenstein) signed a free trade agreement which has been sixteen years in the making. The pact will create one million jobs in the country over the next 15 years. 

  • Australian Treasurer Jim Chalmers’ legislation to reform the Reserve Bank of Australia is stuck in the Senate with members disagreeing with who should sit on the planned monetary board. 

  • Australian wine companies and lawmakers said China proposed lifting tariffs, signalling the end is near to a three-year trade dispute as both countries seek to strengthen ties. 

  • China’s foreign minister Wang Yi is set to travel to Australia next week, the highest-level official visit from Beijing in almost seven years. 

  • The US House passed a bill to ban TikTok unless ByteDance sells the video sharing app. The bill now goes to the Senate for a vote. 


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