15 NOV 21 – Monday Market Highlights – Transcript

Roland Houghton
Good morning. It’s Monday the 15th of November and I’m rolling from Milford. US CPI was a key focus of last week, with the print smashing most estimates, headline inflation grew 0.9% month on month and 6.25% year on year. This compared to consensus estimates of 5.8% energy continues to be an issue increasing 4.8% month on month and 30% for the year. Food is also grinding higher increasing 0.9% month on month, the same rate of growth experienced in September, backing up these quote unquote non core volatile metrics. Core inflation grew 0.6% month on month taking full year inflation to 4.6%, the highest level since 1990, and a hit of 4.3% expected we take this one step further and back out more transitory items such as airline tickets. This metric also is grinding higher going 0.4% month over month and 2.65% year on year. Now this is much stickier inflation. This so yield the short term edition of the curve increase week on week is more pressure mounts on the US Federal Reserve who remain firmly in the transitory inflation camp. Now the US aren’t aloneness. China’s October PPI came in at a 26 year high and Germany’s October CPI was also at a 28 year high. Domestically, Ozzie employment data was released which was a bit softer than expected, with total employed falling 46,001st expectations of a 50,000 increase. The unemployment rate also came in much higher than expected at 5.2% compared to estimates of 4.8%. Now October was a strange month given the various levels of lockdowns across the country. So we would look at it with a grain of salt and I’d focus on sick job ad data, which is at record highs pointing to a strong recovery in employment over the next few months. Broad credit growth in China, which had been declining, leveled off in October, and there are some signs that Chinese policy is turning more supportive as they respond to strains in the property sector. This has alleviated some market concerns that China would not stimulate, and that growth would continue to grind lower. Although this may still be the case the credit data this week was taken well by the market. Finally, UK GDP data was released coming in slightly below market estimates at 6.6% for the year for 6.8% expected turning to equity news, US reporting season continues to wind down and it was a strong one with the average EPS beating estimates by 9%. And surprisingly, energy stocks have a strongest quarter relative to expectations, beating estimates by 23% on average. Now the 9% beat was largely driven by strong operating margins given sales only actually beat by 2%. Now despite this guidance was a touch more conservative and hence December quarter earnings estimates haven’t been increased. Interestingly, mentions of labor and supply chains on conference calls increased 250% and 360% respectively. This highlights the markets concern and focus on labor shortages and supply chain issues. Now the bit of unexpected credit data out of China so some of the iron ore names globally rally and domestically, Rio bhp and champion iron for example, were all up between five and 10% on Thursday and Friday. Now it’s been a busy period for the IPO market in Australia, but it’s most certainly slowing with comfortdelgro inhealth engine. The latest two potentials to be scrapped this week and vintage are looking less likely. In addition, IPM human services listed and had a relatively tough debut falling 6% On a more positive note SiteMinder had a very strong first week increasing 38 and a half percent on the day of listing and 40% for the week. Sydney Airport entered into a scheme implementation agreement as the board finally recommended the bid after the consortium increased their price to $8.75 per share. This compares the original bid of $8.25. Now this is not a done deal yet as you still require a range of approvals such as a triple C. Finally, Playtech the UK listed company aristocrat leisure is hoping to acquire was approached by Goethe investments who are apparently interested in lobbying a competing bid. The Playtex share price close at six British pounds and 35 Pence first aristocrats bit of six pounds and 80 pence. The complication aristocrats faces is that Gopher is the firm who are going to buy the financial arm of Playtech and aristocrats acquisition was conditional on the sale of that financial arm. Therefore, this hands a lot of negotiating power at Gopher, who own approximately 5% of Playtech. Looking to the week ahead, it’s a little bit light in terms of macro news flow. However, we do get a lot of inflation data with core inflation to be released for UK, the EU, Canada and Japan and Australia. We are currently in the middle of AGM season, what was once a relatively uneventful period has become increasingly important and we would expect a number of trading updates and potential updates to guidance or even given guidance for the first time. These will be very closely followed given the volatile operating environment many businesses find themselves in. Thanks for listening, we’ll see you next week.