Tariffs front and centre

Markets

A volatile week for equity markets with falls early in the week on tariff concerns before a recovery led by falling bond yields, positive US economic data, and A.I. optimism resulted in a broadly flat finish for the week.
US bond yields moved higher earlier in the week with comments from the US Treasury Secretary Scott Bessent reiterating the administration was focused on lowering yields rather than encouraging the Fed to cut rates. Yields eventually finished the week lower on tariff uncertainty.
In local stock news, Origin Energy shares fell after the company reported its December gas production was slightly lower than the prior quarter.
ResMed shares dipped despite beating expectations by announcing US$1.3 billion in revenue in the December quarter. This was up 10% from a year ago. Gross margins came in slightly lower than market expectations.
Fisher & Paykel Healthcare shares fell more than 7% to a six-month low as the respiratory-device maker said the tariffs would likely hurt its bottom line in 2025/26 given that 45% of sleep apnoea products are manufactured in Mexico.
Insignia Financial shares rose to a three-year high after the company received a third non-binding takeover proposal, this one from Brookfield at $3.1 billion.
News Corp’s ASX listed shares rose after the media giant posted $2.24 billion in revenue in the three months to the end of December, up 5% from a year earlier.
Oil prices fell this week, hit by rising US stockpiles and concerns regarding Chinese tariffs on the US which may impact US oil exports.

Economics

The RBA’s private sector credit data showed the stock of credit rose by 0.6% in December to be up 6.5% for the year. The pace of credit growth has been led by an acceleration in housing investor credit and business credit growth, with the overall pace of growth faster than would be implied by the economy.
Australian home prices fell by 0.2% across the eight capital cities in January, the fourth consecutive monthly fall. Prices were down in January due to Sydney, Melbourne, and Canberra, with values increasing elsewhere.
Australian building approvals rose by 0.7% in December. Private detached housing approvals fell by 3% in the month to sit 1.8% lower through the year. Private sector multi-unit dwellings rose 15.2% in the month and are 42.7% higher through the year.
Australian retail trade fell by 0.1% in December, much less than expected, to be 4.6% stronger through the year. Volumes rose 1% in the December quarter on discounting and easing price growth.
Australia’s goods trade balance narrowed to $5.1 billion in December, with imports up a large 5.9% and exports up 1.1% in the month. The result should detract from economic growth in the December quarter.
One of the US Fed’s preferred measures of inflation, the core PCE, rose 0.2% in December and 2.8% for the year, which was in line with consensus. The employment cost index rose 0.9% in the December quarter, personal income lifted 0.4% in December with personal spending up 0.7% (above consensus).
US private payrolls rose by 183,000 in January coming in well above expectations.
US job openings fell from 8.16 million in November to 7.6 million in December, coming in below expectations.
The Bank of England cut interest rates by 0.25% to 4.5% but provided some caution regarding further cuts given an expected inflation spike and global economic uncertainty.
China imports of iron ore and coal dipped in January to multi-month lows. However, prices for iron ore have held up while thermal coal prices have fallen to their weakest in almost four years.
Chinese manufacturing in January came in below consensus and the previous month’s reading but remained in positive territory. The tone of the report was upbeat given stronger growth in output and new orders, while exports edged lower.
Japan core inflation rose 2.5% in January, the highest since February 2024, matching expectations and follows a 2.4% rise in the prior month.

Insights