20 DEC 21 – Monday Market Highlights – Transcript

Roland Houghton
Good morning. It’s Monday the 20th of December, and I’m Roland from Milford. The key focus was on the Federal Reserve committee meeting last week to see if they change their tune given the mounting inflation pressures. As expected they did. They are planning on reducing the purchase of treasuries and mortgage backed securities to 30 billion a month from 60 billion a month, putting it on track to conclude the program in early 2022, rather than mid year as initially planned. This will pave the way for the first increase in rates since 2018, with officials now expecting the Fed to raise three times in 22 and three times in 23. UK inflation data was released, which increased 5.1% in the 12 months November, up from 4.2% in October, and a hit of 4.7% expected. This is the steepest incline for a decade and more than double the Bank of England’s targets. The Bank of England hiked rates by 15 basis points posts a strong CPI print. This was expected, but market thought they might hold off due to the latest virus outbreak. Australian employment data was released and materially exceeded consensus expectations. Australia added 366,000 jobs in November 1 market estimates of 200,000 the unemployment rate fell to 4.6% and the participation rate jumped to 66.1%. pleasingly, the underemployment rate fell materially from 10% to 7.8%. New Zealand GDP data was released for the September quarter and saw the economy contract 0.3% year on year, beating expectations of a 1.6% contraction. Turning to equity news, after much speculation IGO officially announced the acquisition of western areas as Ito looks to increase their nickel exposure INGOs offering $3.36 per share, which was a 4% premium to western areas pre deal price, CSL announced the acquisition of vifor pharma, a Swiss listed pharmaceutical business that specializes in renal disease and iron deficiency. They are offering us $180 per share, which values vifor at 16 Point 4 billion Australian dollars. This was a 40% premium to the average trading price in the two months prior to Presley’s of the steel happening CSL expect this to be low to mid teens accretive and the first full year of ownership, including synergies. However, these synergies will take three years to come through. to fund this they raised 6.3 billion Australian dollars at $273 per share, which was an 8% discount to its last trading price CSL close at $272 per share on Friday. Home co daily needs REIT charter Hall retail and adventus all announced the revaluation of their assets last week, and like SCP the week before them, these have increased materially since June, increases range from 8.5 to 10%. As demand for neighborhood retail assets and large format retail assets remain buoyant and a pleasant surprise vicinity centers who own larger assets including those in the CBD, so valuations stabilized and actually increased by 2.2%. The Consumer Financial Protection Bureau essentially the US consumer protection agency announced an inquiry into the Buy Now pay later sector and requested a number of buy now pay later operators to handover data. That three key areas of concern are the accumulation of debt across multiple providers. regulatory arbitrage, ie circumventing laws and what the Buy Now pay later operators are doing with very sensitive consumer data. Heightened regulation is inevitable for this industry. And this announcement contributed to a pretty sharp sell off in the Buy Now pay later space with zip after pay and sizzle all off between six to 10%. Turning to the week ahead, the expectation is that domestically deals will either slow or cease this week given the lead up to Christmas. With regards to economic data. We have both the US and UK GDP September quarter releases this week, with the market expecting the UK economy to grow by 6.6% year on year and the US to go 2.1% quarter on quarter. We also have the core PCE data to be released in the US on Christmas Eve our time, which is the Federal Reserve’s preferred measure of inflation. The market expects us to increase 4.5% year on year, which compares to core CPI inflation of 4.9% that was released earlier in the month. We also continue to monitor the Omicron variant as we try to understand how contagious and dangerous it might be. Thanks for listening. This will be our last podcast for the year. Have a great Christmas and a Happy New Year.