13 JUN 2022 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday the 13th of June and I’m Kate from Milford. The RBA made a bold move this week following other global central banks by hiking the cash rate by 50 basis points. This brings the cash rate 2.85%. This compared to expectations of a hike between 25 and 40 basis points, which highlights the RBS commitment to regain control of inflation. The rate hike of 50 basis points is also evidence of the RBA. Moving back to conventional monetary policy moves of either 25 or 50 basis points. Australia’s major banks sold off significantly on the RBA announcement, with concerns around the pace of the rate hikes and potential credit implications. The share price reaction was also reflecting the likely end to the exceptional growth the banks have experienced in their mortgage books over the last few years. The banks did recover slightly by the end of the week. The European Central Bank turned more hawkish this week. Although they maintained the cash rate at 0%. They signaled rising rates for next month to combat inflation. Moving to the US, we saw another strong inflation print of 8.6%, which compares to consensus forecasts of 8.3%. This was the highest reading since December 1981. Core inflation was also strong at 6% versus consensus forecasts are 5.9%. And finally on global news, parts of Shanghai returned to COVID lock downs on Thursday, after easing restrictions only a week earlier. Turning to equity news energy provider AGL announced that they are extending the outage at lo Yang until the second half of September. They did not provide updated financial guidance, but they were previously guiding to an estimated total financial impact of this outage to be $73 million based on an expected return to service. By the first of August 2022. Toll Road owner Atlas arteria announced that it had been advised by IFM that they had obtained a combined economic interest of 15% of Atlas. The shares were secured via a combination of swaps and physical shares, which transacted at $8 to build the last leg of their stake. This represented a 14% premium IFM requested nonpublic information from Atlas in order to decide whether to submit a non binding indicative proposal to acquire all of the business. However, Atlas declined to provide the information. But they did offer IFM the opportunity to meet with senior management to discuss selected topics based on publicly available information. Finally, on equity news, Hamish Douglas, the co founder of Magellan announced that he will return to the investment firm in a consultancy role. The announcement stated that he will provide valuable investment insights including geopolitical and macro economic views, and enable him to deliver his expertise to investors free from board management and portfolio responsibilities. Looking to the week ahead, the Westpac consumer confidence index will be released this week, which will provide a good indication of Australian households financial health, expectations on economic conditions and buying conditions for major household items. Also look out for the Australian unemployment rate numbers. Looking offshore US retail sales data for me will be announced. Consensus is forecasting point 2% month on month, down from point 9% For the month of April. And finally later in the week, the Fed will announce their interest rate decision. The market is expecting a rate hike of 50 basis points. Thank you for listening, and we’ll see you next week.