22 NOV 21 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday the 22nd of November and I’m Kate from Milford. RBA minutes were released this week which unpacked their reasons for abandoning the yield target policy. Previously, the RBA was targeting the APR 2024 bond yield at point 1%. However, the RBA opted to discontinue the policy as inflation risk had shifted higher, and a cash rate hike before 2024 had become a possible outcome. However, the RBA maintain their view that the current inflation is transitory, and they will be patient on rate hikes. a rate hike will depend on multiple factors including underlying inflation targets to within the two to 3% range and employment targets reiterating wage growth of at least 3%. The RBA noted that faster than expected inflation makes a case for a rate hike before 2024. However, the latest data and forecasts do not warrant a rate hike in 2022. The RBA also added that it will review quantitative easing in February 2022, at which point, the market expects QE to taper again before unwinding around the second half of 2022. The Ozzie wage price index came out last week, which saw wage growth of point 6% quarter on quarter and 2.2% year on year in line with consensus estimates. While wage growth hit a two year high it remains below the RBA threshold of 3%. As previously mentioned, following the wage growth print pm Scott Morrison resisted pressure to ramp up migration intake, believing in doing so will suppress wage growth. Australia’s banking regulator APRA announced additional tools to rein in home lending, including house lending limits of more than four to six times debt to income and reducing lending to borrowers with loan to value ratios of greater than 80 to 90%. This is a headwind to forward loan growth for banks. moving offshore, the UK real released their inflation print, which beat most estimates, headline inflation grew by 1.1% month on month and 4.2% year on year. This compared to consensus estimates of 3.9%. Core inflation grew by point 7% month on month and 3.4% year on year ahead of expectations of 2.9%. A similar inflation outcome in Europe with headline inflation growing by point 8% month on month and 4.1% year on year versus consensus estimates at 3.4% and cornflakes and grew by 2% year on year in line with consensus. Finally the US retail sales data for October was released which Seoul retail sales grow by 1.7% month on month.

Turning to equity news, aristocrat reported their full year FY 21 result, which saw strong growth in group earnings, which was driven by the digital and gaming segments in both the Americas and ANZ yet, however, cost did surprise on the upside which the market was focused on. The outlook for FY 22 is on further organic growth, and indicated it will increase investment in r&d to support this growth. Woodside petroleum announced the sale of a 49% stake in their Pluto train to LNG project to global infrastructure partners that 835 million US following the completion of the sale Woodside will maintain their 51% stake and will remain the operator of the project CBA released their September quarter update, which was a 5% Miss at the pre provision profit line driven by a 1% cost miss and weaken them due to intense mortgage competition. The result cause material downgrades as the market questioned where the CBA justifies its large premium to other major Ozzy banks. Crown resorts received another non binding cash takeover offer from Blackstone for $12.50 per share. This represented a 25% premium to the previous close price of $9.90 per share. This is an upgrade to their prior offer of $12.35 in May this year. The offer is subject to a number of conditions, including casino regulator approval in Victoria, New South Wales and WA. However, Blackstone stated regulators advisors have indicated there is no reason to believe an approval would not be realized. Looking to the week ahead, the RBN said meeting will be held on Wednesday. By rates markets are pricing in a rate hike of 50 basis points. Later in the week, we can expect to three US GDP growth rate data, which is expected to be 2.2% growth quarter on quarter. The US will also release their core PCE Price Index, which measures the price paid by people for domestic goods and services, excluding volatile items like food and energy. This index is the Feds preferred inflation measure. The market is expecting point 2% month on month growth for core PCE Price Index. Thanks for listening, and we’ll see you next week.