18 JUL 2022 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday the 18th of July and I’m Kate from Milford. This week we saw strong CPI print from the US rising 1.3% in June to 9.1%. And core CPI jumping point seven 1%. The monthly gains were well above expectations and were broad based across the major components. Rent was particularly strong with a 36 year high reading, and is one of the largest and most persistent inflation categories. This will keep pressure on the FOMC to be aggressive in the July meeting in two weeks time. Markets are now expecting at least a 75 basis point hike in July. In Australia, we saw a very tight labor market data with an Australian unemployment rate of 3.5% down from 3.9%. Previously, this compared to expectations at 3.8%. The unemployment rate is now at the lowest level since 1974. job ads were also well above forecasts at approximately 90,000 versus 30,000 expected. Following the strong employment data, we saw some decent moves in the Australian bond markets repricing the short end of the curve higher. Some banks are now forecasting a 75 basis point hike in August up from 50. The RBNZ said lifted the cash rate by 50 basis points to 2.5% last week, which is the third consecutive 50 basis point move, but was widely expected. The forward guidance remains largely in line with market expectations with the RBNZ fed saying that it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support sustainable employment. And finally on economic news, Nord Stream one gas pipeline has a scheduled two week maintenance, which places further pressure on Europe’s energy security flows through the pipeline have already reduced to 40% of capacity since mid June. The German government and industry gas consumers worried that Nord Stream gas flows might stay lower for longer, which could impair the country’s target to fill existing gas storage facilities by 90% before winter. Turning to equity news this week, and Zed confirmed market speculation that it is in discussions with private equity giant KKR about a potential acquisition of Mild. Mild is one of Australia’s leading providers of business management, financial and accounting solutions for SMEs enterprises, and accounting practice customers. Since speculation surfaced, the a triple C has raised preliminary concerns regarding the acquisition and that they will conduct a public review if the transaction proceeds. further speculation surface that ANZ is also in talks on a potential acquisition or merger with some corpse banking out. Buying Suncorp would immediately add about 60 billion of customer loans to ANZ Fed’s balance sheet, of which 80% would be mortgages. It will also boost an Zeds exposure to Queensland and New South Wales housing markets. To major US banks JP Morgan and Morgan Stanley reported their first half results, both showing lower investment banking fees with both missing guidance, but traditional banking volumes revenue and net interest margins expansion were all strong. JP Morgan also announced that they are suspending their buyback in order to quickly meet risk weighted asset requirements and allow maximum flexibility through a broad range of economic environments. Looking to the week ahead, New Zealand’s second quarter CPI print will be released today, which is expected to rise by roughly 1% this quarter. The Euro inflation print will also be out this week, which is forecast to be 3.7% down point 1% from last month. The European Central Bank will also provide that interest rate decision on Thursday. The main policy interest rate is currently at negative point 5%. Some banks are forecasting it could be at zero. By the end of September. The RBA meeting minutes will be released midweek which will explain the 50 basis point hike decision from June’s meeting. And finally, US reporting season kicks off this week, which will provide some good insight into the health of the US economy and outlook. Thank you for listening and we’ll see you next week.