16 MAY 2022 – Monday Market Highlights – Transcript

Roland Houghton
Good morning. It’s Monday the 16th of May, and I’m Roland from Milford. The key economic news was most certainly the US inflation print that was released Thursday morning, our time, headline inflation increased 8.3% year on year slightly slower than the 8.5% record in the prior month. This is due to energy prices falling month by month, but also because CPI is now comping larger numbers in the previous year. Going forward, the Fed and market participants will focus more on monthly inflation prints rather than the annual inflation prints. Despite the slowing from an annual perspective. Under the surface, the trends were quite concerning. Core inflation, which excludes food and energy increased 0.6% month on month ahead of all key economists expectations. Some very sticky parts of inflation, such as rents continue to grind higher, showing no signs of abating. A measure we track that excludes the more transitory items such as airline tickets and use car prices also continues to grow and higher, increasing 0.4% month to month and accelerating to 3.7% year on year. USPPI data was also released which increased 11% year on year versus 10.7% expected core PPI grew 0.4% month to month, which was slightly softer than 0.6% expected. Remember, this is the price inflation domestic producers are experiencing and hence is generally a leading indicator for consumer price inflation.

Now turning to equity news, and although cryptocurrencies are not equities, they are influencing global equity markets. So it’s worthwhile understanding the lunate tariff situation that unfolded last week, which sold billions of dollars value destroyed. Tara issue stable coins, which are as they sound supposed to be stable, and the most popular coin was Tara USD, or USD T, which was apparently pegged to the US dollar. For example, one us t was supposed to be consistently worth one US dollar, rather than using vast foreign asset reserved as as normal for a pegged currency. They utilize an algorithmic approach, which relied on investors arbitraging, the difference in price between us tea and terrorists. Cryptocurrency Luna, simply of us tea fell to 99 cents from $1, you’d buy it and convert it into $1 Worth Aluna making a one cent profit. The ust that you sold was destroyed and given there were fewer units and now an issue that would theoretically appreciate in value back to the one dollars. The same worked in reverse. As I’m sure many listeners have surmised, this experiments collapse spectacularly last week, as investors fled both Luna coin and ust with them falling 99% and 80%, respectively. This saw billions of dollars of capital wiped out in less than a few days, and understandably caused them to question the stability of so called stable coins. All eyes will turn to tether and USD coin the two other larger stable coins. Incredibly, these stable coins are collectively estimated to be worth us $180 billion. This event added to the already volatile crypto market with key crypto bellwethers, such as Bitcoin and Aetherium, falling 12% and 19% respectively last week. Now turning to global equity markets, these two remain extremely volatile. The NASDAQ was down 2.8% Last week, but was down 8.5%. At one point, the s&p 500 fell 2.4% but was down 6.4% At one stage. Domestically, the ASX 200 fell 1.8% but was down by as much as 3.8%. Turning to companies specifically, fever energy released a very strong update in the first four months of the year increased EBIT die by 65% year on year to 308 million. This was driven by very strong refining margins, which are around US dollars 26 A barrel in April increasing significantly from us. $11.50 achieved in March, just one month prior TPG Telecom was the third and final Australian mobile network operator to monetize their towers. They sold approximately 1200 towers for 950 million and they expect net proceeds of 890 million which would be used to pay back debt. The headline multiple was 32 times EBIT da however, they will build out 252 More towers which would then see the multiple drop to around 27 times which is largely in line with the Telstra and Optus tower sales. TPG ended up 8.6% for the week. Looking to the week ahead, we have the RBA minutes on Tuesday, which should provide more color around how Australia’s Central Bank are thinking about the current inflationary environment and how best to combat it. On Wednesday, the Aussie wage price index will be released for the March quarter, with economists expecting a 2.5% annual increase in wages. We also have the April employment data to be released on Thursday, with the market expecting an unemployment rate of 3.9% unemployment to increase by 25,000. In the US, we have retail sales out this week, with the market expecting a 0.8% increase in retail sales. Also in the US, we have federal chair Jerome Powell speech, the market will be closely watching any commentary around the path of interest rate hikes, how aggressive the Fed plans to be, and any change the current pace of quantitative tightening. from a company perspective, we remain in the depths of the US quarterly reporting season and have a number of interesting companies reporting this week such as Target, Walmart, Home Depot and footlocker which will give us a good read on the consumer and how they’re managing their supply chains and the heightened level of inflation. Thanks for listening. We’ll see you next week.