20 JUN 2022 – Monday Market Highlights – Transcript

Will McVeagh
Good morning. It’s Monday the 20th of June and I’m Will from Milford. Last week saw continued volatility in global markets. As inflation worries continued to concern investors. The s&p 500 posted a two week decline of greater than 10%. The first time this has been seen since March 2020, while the ASX 200 was down nearly 7% on the week to 18 month lows, crypto also took a beating, with Bitcoin ending the week at close to 20,000 US dollars, levels not seen since late 2020. The US Federal Reserve raised interest rates by 75 basis points to 1.75%. At its meeting last week, the largest increase since 1994. The Fed is trying to call red hot inflation that is running at 40 year highs while looking to avoid plunging the US economy into a recession. The central bank also signaled further aggressive hikes were to come with the predictions having the Fed funds rate at 3.4% by year end and peaking at 3.8% in 2023. The European Central Bank held an emergency meeting last week to try and combat dysfunction in European bond markets. The ECB is concerned about the widening gap and the cost of borrowing between more stable countries such as Germany, and more vulnerable member states such as Spain and Italy. There is concern that this could lead to the debt crisis seen in Europe between 2012 and 2014, which threaten the stability of the bloc. The central bank said they would develop a new instrument to try and fix this issue. However, little detail on how it would work was released. The Australian Fair Work Commission released the annual minimum wage decision on Wednesday, the Commission decided to increase the minimum wage by 5.2% Double last year’s 2.5% increase in the biggest moves since 2006. In addition, they increase the award wage by the larger of 4.6% or $40 per week. These increases were larger than the market or the RBA were expecting putting further upward pressure on wage inflation. This decision affects about 1/3 of Australian workers and it’s expected that these increases will contribute an additional 0.7% to headline wage growth. Australian employment numbers on Thursday continued to show a very tight labor market. The unemployment rate was flat at 3.9%. With the economy adding 60,000 new jobs in the month. Participation continues to be strong, edging up 66.7%. This release combined with the Fair Work Commission’s rolling on wage increases will continue to put pressure on the RBA to tighten aggressively this year. Turning to stock news last week, racemate announced they’ll pay 950 million euros for German SAS business MIDI fox den representing a purchase price of 12 times revenue or 38 times earnings. MIDI Fox is an outpatient and practice management system that will likely replicate some existing risk meet us capabilities into Europe. The acquisition will be funded from debt and is expected to be EPS accretive Australian bus and ferry operator calcium, but for London bus operator go ahead group and a transaction that can be worth a billion dollars last week. Go ahead operates the iconic London double decker buses plus other bus and train services throughout Europe. Kelsey and however, we’ll have competition from Australia’s largest bus operator kinetic who also have submitted a bid. Next week, folks domestically will be on the release of the June RBA board minutes. The market will be looking closely for any further hints as to the path forward for rate hikes as the central bank continues its hawkish pivot. Last month minutes provided some good insights on how the central bank was thinking about the pace of future rate increases. In the UK, we will get the latest inflation print on Wednesday evening. year on year inflation is expected to tick higher to 9.1% from 9%. Previously, month on month, however, is expected to slow to 0.7% from 2.5% and the prior month after the bump the US CPI print two weeks ago this will be closely watched. That’s all for this week. Thanks for listening.