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Weaker economic data lifts hopes for rate relief

Markets

  • Local and global stocks moved higher this week with investors buoyed by potential central bank rate relief as economic data worsened. 

  • Chipmaker Nvidia shares continued to surge becoming the most valuable listed US company for the first time, surpassing Microsoft with a US$3.34 trillion market capitalisation. 

  • Wall Street analysts now expect the largest 500 US companies’ second quarter earnings to jump 9% from a year earlier. This would be the biggest increase since the first quarter of 2022. 

  • In local stock news, there was much fanfare following the first day of trading on the ASX for Guzman y Gomez shares with a valuation of $2.2 billion. Its shares finished up 36.4% on the day. The float is the biggest on the ASX in three years. 

  • An IMF report showed that the US had captured almost one-third of all the investment that flowed across foreign borders since Covid, climbing from their pre-pandemic average of 18%. Explains the strong demand for US dollars. 

  • The oil price moved higher this week on supply concerns. 


Economic

  • The RBA Board left cash rates unchanged at 4.35% as expected with the statement little unchanged from the previous meeting. A very slight increase in talking tough on their inflation fight with comments post the meeting confirming the board considered a hike. 

  • Australian monthly job ads released by ANZ and Indeed showed Australia’s labour market continued softening in May

  • US retail sales rose 0.1% in May, coming in below expectations. Industrial production lifted 0.9% in May whilst business inventories were up 0.3% in April. 

  • US import prices fell 0.4% in May, above expectations, with export prices down 0.6% coming in below expectations

  • A key US consumer sentiment index fell to a seven-month low in June, coming in well below expectations. 

  • A key US manufacturing index rose in June, remaining in contractionary territory but coming in well above expectations. 

  • US housing starts dropped 5.5% in May, coming in below expectations. Building permits fell 3.8% whilst a key house price index fell in June coming below expectations. 

  • The Bank of England kept policy rates steady with a 7-2 vote, but the minutes indicated that some members may be close to voting for a cut. 

  • Annual headline British consumer prices fell to the Bank of England’s target of 2% in May, its lowest since July 2021, from 2.3% in April. Data also showed that core inflation eased to 3.5% in May from 3.9% in April. 

  • Bank of Japan maintained the amount of bond purchases (money printing) for now, but flagged it plans to cut purchases and will decide on the details at its next meeting. 

  • China’s industrial production and fixed asset investment data missed expectations in May, whilst retail sales improved on April’s growth

  • The Bank of China kept a key interest rate unchanged for the tenth straight month, as Chinese home prices fell at a faster pace in May with falls in seventy cities. 

  • NZ’s economy exited recession with a modest expansion in the first quarter, with economic growth of 0.2%, beating expectations. The economy is struggling under the weight of very high rates.


Politics

  • The Australian superannuation and pension regulator, APRA, said some funds aren’t valuing assets such as private equity and property frequently enough. APRA’s recommendations are for at least quarterly valuations. 

  • Indian Prime Minister Modi’s cabinet appointments appear to have eased concerns among investors of a meaningful shift in policy under the new coalition government. 

  • US President Biden is planning another US$50 billion in aid for Ukraine and expanded sanctions targeting Russia. The latest round of sanctions effectively saw the end of three decades of daily exchange trading in the US dollar for Russia’s Ruble. 

  • Chinese Premier Li Qiang visited Australia, the first senior Beijing official to visit since 2017. Announcements made thus far include steps to improve military communication to avoid future standoffs and Australia’s inclusion in China’s visa waiver program, along with a visit to lithium mine backed by Chinese investment. 

  • Treasurer Jim Chalmers made the bold claim that the pursuit of nuclear power in Australia was “economic insanity”, claiming nuclear takes longer and costs more, whilst also claiming there would be no private sector investment interest in it. Those are very bold claims. 


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