Markets
Local and global equity markets had a mixed week with ongoing reporting season and weaker than expected Chinese data.
In local stock news, IAG shares rose after beating consensus estimates with a full-year profit of $347 million, compared to a $427 million loss the year before, although the company also cut its dividend after an extraordinary year of natural perils claims.
BHP recorded a bumper result recording its second biggest profit ever, US$23.8 billion, driven by surging commodity prices and record iron ore sales. The result allowed them to lift dividends by 8% on the full year.
CSL shares fell after the company reported a 6% drop in full-year net profit to US$2.26 billion facing higher costs to coax Americans to donate plasma.
ResMed shares fell despite the sleep apnoea device maker announcing a 4th quarter net income above estimates with revenue up 4%.
GPT Group shares rose after announcing its funds from operation had increased 8% to $326.5 million in the six months to June 30, compared to the same period in 2021. Retail sales had recovered to above 2019 pre-pandemic levels, tenant demand was strong for logistics, and leasing demand for office space had picked up in the quarter.
Carsales.com.au shares rose after reporting full-year net profit after tax had risen 23% to $161 million, with the company predicting very strong revenue, profit growth, and margin expansion in the next FY.
Goodman Group shares fell despite the company reporting it had lifted its full-year operating profit by 25% to $1.53 billion and had expanded its assets under management.
The Aussie dollar fell this week with weaker than expected jobs numbers and Chinese data providing downward pressure whilst the US Fed minutes provided further support for the US dollar.
Economic
Australian wages growth printed softer than expected rising 0.7% in the Q2 with the annual rate stepping up to 2.6%. Private sector wages grew by 0.7% whilst public sector rose by 0.6% in the quarter. This print might allow the RBA room to slow or reduce the size of rate increases from here.
Australian employment fell by 40,900 in July, the first monthly fall since October 2021, and well below estimates of a 25,000 lift. The unemployment rate still ticked lower as the labour force participation rate fell from its record high in June. The weak July number was driven by a fall in full-time employment.
Surprisingly, a key US consumer sentiment reading increased in August from July, the highest reading in three months and well above market forecasts. The expectations component rose strongly but the current economic conditions component fell.
US import prices fell by 1.4% from a month earlier in July, falling further than market expectations in the first decline in prices since December 2021. Fuel import prices dropped sharply.
US housing starts declined 9.6% in July from the previous month and were lower than economist forecasts, stoking further recession fears.
The British economy expanded 2.9% in Q2 on the same time last year, coming in slightly above market forecasts. Household spending slowed sharply whilst business investment remained robust.
UK inflation accelerated more than expected in July to the highest in 40 years with a former Bank of England official remarking that the key rate may need to rise as much as 4%. A massive problem considering most of the inflation is the function of rocketing food and energy prices, and a labour shortage post Brexit.
The annual inflation rate in India edged lower in July hitting a 5-month low whilst also coming in slightly below market forecasts. The move lower came as the cost of food, transportation & communication, and health all fell, whilst the cost for fuel and education rose.
Hong Kong’s economy contracted 1.3% in Q2 on the same time last year which follows a downwardly revised Q1 3.9% decrease. Net trade was the main drag, with private consumption flat and a surge in government spending.
Chinese factories are reporting that orders from overseas customers are drying up as households tighten their belts to deal with a rapid rise in the cost of living.
A slew of Chinese economic data saw industrial production rose 3.8% from a year ago but came in well below economist forecasts of a 4.6% increase, and slightly lower than the June figure. Retail sales also grew at a slower than expected pace of 2.7%, versus the 5% forecast. China’s jobless rate for the young hit 19.9%, the highest ever recorded. New house prices were also down. The result was a cut in rates from the central bank, cutting main banking rate and the rate on its one-year lending facility, both by 0.1%. It was the first time since January these rates had been cut.
Politics
A US congressional delegation landed in Taiwan over the weekend for a 2-day visit following Speaker Nancy Pelosi’s trip that drew a strong response from China, which included missile tests, military exercise, and sanctions. The latest trip was for the US to reaffirm its support for Taiwan, with both countries confirming they will start formal talks on a trade and economic initiative, drawing greater ire from China.
Germany is still struggling to get enough fuel to get through the coming winter with stockpiles currently 77% full. Even if they got to 95% by November, this would only cover about 2.5 months of demand if Russia cuts off supplies completely.
A US state department spokesman has said that the big issues in the US/Europe/Iran deal have largely been settled and that it was close to what the US was looking for. It raised fresh hopes that Iran, the US, and other signatories to the 2015 nuclear deal are close to reaching agreement to reinstate it after 18 months of talks.
US President Joe Biden signed the tax, climate, and health-care bill into law, sealing a major legislative victory ahead of the November mid-term elections. The US$437 billion bill contains US$374 billion in energy and climate provisions including tax credits for electric vehicles, as well as provisions to lower the price of medicines for seniors, which comes after the Biden administration revoked the previous administrations drug reduction program upon taking office.
Reports indicated that the Chinese Premier has promised more fiscal support via government bond issuance and has asked local officials from 6 provinces to adopt more pro-growth measures as covid-zero policies continue to take their toll.
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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