30 MAY 2022 – Monday Market Highlights – Transcript

Nick Morgan
Good morning. It’s Monday the 30th of May, and I’m Nick from Milford. Looking at the key economic news from last week, starting in New Zealand, the RBNZ continued with their hawkish stance and raised the OCR by a further 50 basis points to 2%. In line with market expectations, what did come as a surprise was the bank’s more aggressive rate hike forecast, which now show the OCR reaching 3.5% By the end of the year, and reaching an overall peak of just under 4%. This was up from the 3.55% peak outlined at the February monetary policy statement and illustrates the bank’s determination to get inflation under control. In the US, we had the FOMC minutes released for the May policy meeting. The minutes confirmed that the Fed plans to move expeditiously towards neutral and as a result is likely to see a further 50 basis point hike at the next meeting. In a slightly dovish tone. The Fed did note that they will be well positioned later this year to assess the effects of the policy firming, signaling the potential to return to 25 basis point hikes or a pause in the tightening cycle. Also in the US was the personal income and spending data. Personal income went up by 0.4% in April, slightly below consensus of 0.5%. personal spending increased 0.9% In April, the head of market expectations of 0.7% and assign that consumption was robust throughout April despite rising prices. In the UK, the PMI is around last week, where the services falling to 51.8 and may well below consensus of 57 and down from 58.9 in April. Survey respondents noted that economic and geopolitical uncertainty had contributed to a slowdown and client demand. The manufacturing PMI also fell to a 16 month low of 54.6. Slightly below forecasts are 55. Remember, if the index remains above 50 implies these sectors are still expanding. Moving closer to home with the Australian retail sales and PMIs out last week, there was a strong retail sales printed rising 0.9% In April, driven by food retailing and a sign of consumer resilience. The manufacturing PMI was strong in May, increasing to 58.5 from 55.7 in April. The services PMI was 53 in May, down from 56.1 in April, although the still indicate an expansion in the sector. Turning to equity news, Woodside petroleum shareholders voted in favor of the merger with bhp oil and gas business and the implementation date is set for the first of June. Eligible bhp shareholders will receive almost 915 million Woodside ordinary shares. That’s one Woodside share for every 5.5 bhp shares held as at the 26th of May. In addition to this, they will also receive the dividend. There are however, some bhp shareholders that are not eligible to receive the stock, such as South African investors and at the same time, there are a portion of small shareholders under 500 shares. They may opt out of the script deal and receive cash instead. Because of this bhp have hired JP Morgan to set up a sale facility. This has created a risk hanging over the market as there is a potentially substantial block of shares to sell. In the US, the s&p 500 finally broke its seven week losing streak and finished the week up 6.58%. During the week, we had an NVIDIA Corporation report that q1 earnings, a US tech company that designs develops and markets 3d graphics processes and related software. The video bit both sales and earnings expectations but due to light guidance, the stock was down up to 10% on the day. Costco also reported last week with a strong result in a very challenging environment. Revenue was better than expected and margins held up reasonably well. Looking forward to the week ahead. In Australia, we have q1 GDP out on Wednesday, and the market expects 3% growth for the quarter. And the US we have the manufacturing and non manufacturing ASM numbers. The market is forecasting needs to be 54.5 and 56.4 respectively. Finally, we have the US employment and non farm payrolls out on Friday. Thanks for listening. We’ll see you next week.