25 JUL 2022 – Monday Market Highlights – Transcript

Nick Morgan
Good morning. It’s Monday the 25th of July. And I’m Nick from Milford. Looking at the key economic news from last week. In the US with the PMI is out on Friday, with the manufacturing PMI urging lower to 52.3. broadly in line with consensus of 52 and down from 52.7 and June, the reading points to the slowest growth in manufacturing activity since 2020. As New Order inflows continue to fall. It is worth noting that cost inflation slowed to its lowest level since April 2021, but remained elevated due to energy, fuel and transportation. Their services PMI had at shoppers for since 2020, fall into 47, down from 52.7 in June and below consensus of 52.6 Continuing in the US within HB housing market index out last week, which continued its losses for the seventh consecutive month, down to 55. Well below consensus of 65. It was the second largest month on month fall since 1985 and the weakest result since mid 2020. This index measures the sentiment among us home builders through a monthly Sentiment Survey of members of the National Association of Homebuilders. The index is a widely observed gauge of the US housing sector. We also had the flash PMIs out of the EU, which showed both manufacturing and services PMI is done month on month and below market expectations. The manufacturing index entered contractionary territory at 49.6 the first time since mid 2020. The European Central Bank had the July meeting last week and hiked rates for the first time since 2011. In an effort to curb inflation. The bank hiked 50 basis points from the current rate of zero above consensus of 25 and ending an era of negative rates. UK inflation continued to rise with the June print at 9.4%. The highest rates since 1982. And above market forecasts of 9.3%. The key price drivers were the cost of motor fuels and food prices. UK PMI is contradicted the recent global trend of PMI has been below market expectations with both services and manufacturing print above consensus, although still down on the previous month, moving closer to home. Indeed, inflation continued to run hot with an increase of 7.3% in the second quarter of 2022. The key drivers were transportation and housing and utility costs. In Australia with the manufacturing and services PMI is out last week, down to 55.7 and 50.4, respectively, signaling a continued slowdown and activity. The RBA raise the cash rate by 50 basis points to 1.35% during its July meeting, and we had the RBA minutes out last week. The minutes noted that members considered both a 25 or 50 basis point hike in July. before settling on the more aggressive option given rates are still low, the labor market is tight and inflation is still running high. The minutes reiterated that the size and timing of rate hikes will be based on data and the outlook for inflation and the labor market. The discussion around a neutral rate noted the cash rate is still well below the lower range of neutral rate estimates suggesting the need for further rate hikes. Turning to equity news reporting season kicked off in Australia last week and we had quarterly trading updates from resource companies including bhp, Northern Star and Woodside. At a high level the June quarter results have been good so far. But most in line with guidance and expectations, including on the cost side realized commodity prices do look to be slightly softer than expected. Excluding coal. The outlook and guidance given will be a key piece to watch this reporting season. And so far, guidance has been soft, providing some early signs of what’s to come and this reporting season for the sector. The US reporting season has also kicked off with the bank’s reporting last week. Goldman Sachs talked to sing inflation deeply entrenched in the economy that they aren’t seeing any credit deterioration yet. They noted they’re feeling good with the quality of the investment banking backlog despite it being down year on year, but that there may see softening in the market. If the challenging environment persists. The Bank of America noted that they are still seeing a strong consumer a high savings rate and credit cards are still being paid off. They also noted that July has continued to be a strong month for spinning but that the MCSA standard changed to include more travel and fuel and less retail spend looking forward to the week ahead. On Wednesday, next week, we have the CPI out in Australia, a key piece of data that the RBA will continue to watch closely market consensus as a 6.3% increase up from 5.1% last month in the US we have the Fed policy meeting on Thursday, with the 75 basis point hike priced in by the market reporting season continues to ramp up next week. In Australia we have Rio reporting on Wednesday and Macquarie group on Thursday. In the US. There are a few big Nan’s reporting next week, including Microsoft and Google on Tuesday and Facebook on Wednesday. It will be interesting to watch how companies are dealing with the heightened inflationary pressures and a key piece to monitor will be the outlook and guidance given. Thanks for listening we’ll see you next week.