16 Aug 2024
Optimism rises on September US rate cut
Markets
- Local and global equity markets rose strongly this week on optimism, and possibly hope, of a potential US rate cut at the Fed’s September meeting.
- In local stock news, JB Hi-Fi shares soared to an all-time high after the company announced it would pay a special dividend following a reported $438.8 million profit in 2023/24. This was down 16% from the previous year but came in better than expected.
- Aurizon shares fell sharply to a one-year low after the rail operator delivered a $406 million full-year net profit, up 11% from last year but below analysts’ expectations.
- CAR Group (carsales.com) shares rose strongly after the company announced its full-year operating earnings had grown 17% to $581 million, with double digit revenue and earnings growth in all their key geographies.
- CSL shares fell after the blood products giant announced its 2023/24 operating expenditures had been higher than expected. Full year net profit rose 20% to $3.95 billion, but guidance was revised lower.
- Seek shares fell after the job classifieds business reported its full-year profit had fallen 26% to $179 million as job-ad volumes fell across the Asia Pacific region.
- James Hardie reported a better-than-expected quarterly outcome, but they flagged a tougher period for the next quarter. Shares fell as a result. First quarter profit came in above guidance and consensus.
- Treasury Wines reported a solid result, in line with expectations, as was guidance with their US business outperforming. Revenue and earnings were up 13%.
Economics
- Australian employment grew by 58,000 in July, well above economist expectations, with the unemployment rate ticking up to 4.2%. The rise was driven by a record percentage of Australia’s adult population joining the labour market.
- The Australian Bureau of Statistics reported that average wages rose by a smaller than expected 0.8% in the June quarter, potentially showing that wage pressures were subsiding with the annual rate steady at 4.1%. Public sector wages growth outpaced private sector.
- Australian consumer sentiment and business confidence data both showed improvement in August and July, respectively, with consumer sentiment remaining deeply in pessimistic territory. Sentiment to family finances rose whilst business conditions rose for the first time in five months.
- US inflation rose 0.2% in July, in line with expectations, which saw the annual growth rate ease from 3% to 2.9%, the lowest since March 2021. Core inflation also lifted by the same amount in the month, whilst easing to 3.2% on an annual basis.
- A key gauge of US consumer inflation expectations edged down slightly in July to below 3%, just below expectations.
- US producer prices rose 0.1% in July from the prior month, coming in below economist forecasts, but possibly easing some fears of stagflation. The annual growth rate eased from 2.7% to 2.2%.
- US retail sales rose 1% in July from the month before, coming in above expectations.
- A key US small business optimism index rose in July, from 91.5 to 93.7, coming in ahead of expectations for a flat result.
- In other US economic data, of which there was plenty, import prices rose but by less then export prices; industrial production slid in July; two key manufacturing data points had conflicting messages; whilst a key housing market index fell in August, coming in below expectations.
- Britain’s economy grew 0.6% in the June quarter, in line with expectations, and building on the 0.7% recovery in the first quarter.
- Annual German consumer prices rose 2.6% in July, in line with expectations, while annual Italian consumer prices lifted 1.6%, coming in slightly below expectations.
- Japan’s economy expanded at a much faster pace than expected with an annualised 3.1% growth rate in the June quarter, rebounding from a slump in the previous quarter. A strong rise in consumption assisted.
- China’s consumer and producer price inflation beat market expectations but didn’t ease deflationary concerns.
- Chinese retail sales improved last month, whilst fixed asset investment growth slowed unexpectedly in the January-July period.
- China’s factory output slowed for a third straight month in July, showing their recovery may be losing steam.
- The Reserve Bank of NZ cut interest rates from 5.5% to 5.25% in its first move since May 2023, whilst also flagging an aggressive rate easing cycle likely ahead of them.
Politics
- Chinese authorities said they would buy up excessive apartments and soak up housing inventories further, in a move aimed to support their ailing property market.
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