29 AUG 2022 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday the 29th of August and I’m Kate from Milford. Fed Chair Powell’s FOMC. Speech suggested he was incrementally more hawkish than it did last meeting. Specifically regarding the willingness to risk higher unemployment and a recession to control inflation. He did reiterate the need to take the policy rate above the neutral level. However, this was already known by markets. The US core PCE Price Index print of 4.6% was slightly below expectations of 4.7%. The total PCE price index came in at 6.3% down point 5% From June. Also from the US the durable goods data Miss forecasts, and us home sales fell to the lowest levels since the start of the pandemic at negative 12.6%. But the US consumer received a boost with the announcement that $10,000 of student debt will be cleared for most borrowers. The European Central Bank’s minutes for the last policy meeting showed the ECB is set to continue with interest rate hikes to combat rapidly rising inflation. Turning to equity news, we are now through the bulk of Australian reporting season, with the key themes being FY 22 results across the board so more companies beat then miss. Also second half results held up better than expected, with the median company beating consensus at the half year and Pat line by point 7%. However, upgrades to FY 23 forecasts have been rare, and many companies only providing qualitative guidance which has generally been cautious into some key results. Woolworths result was slightly above consensus delivering net operating profit after tax of 1.5 billion growth of 1% versus the previous corresponding period. The New Zealand business performance was worse than the pre guide flagging operational challenges which was accelerated by the competitive environment. Well worth sales continued to outperform relative to Kohl’s for example, fourth quarter Australian food segment like for like sales grew 5.2% compared to Kohl’s which grew 3.7% Both Coles and Woolworths outlook commentary was subdued, but unwinding COVID related costs and food inflation will provide a tailwind in FY 23 quantas reported underlying profit before tax loss of $1.86 billion. However, their second half EBIT dark was $526 million, which was towards the top end of their guidance range that they issued in June. cuantas also announced a $400 million buyback, which highlights the strength of their balance sheet and management’s confidence in the Outlook. On the outlook management expect to fully recover earnings within fy 23. With demand recovery and higher ticket prices, offsetting higher fuel costs and cuantas improving their operational performance. out outside of results. Private Equity giant KKR pulls its bid to acquire Ramsay health care for $88 per share all cash offer. The consortium led by KKR indicated that it remains committed to the alternative structure, whereby Ramsay shareholders would be able to elect to receive a 100% Cash consideration of $88 per share for their first 5000 Ramsay shares. An excess shares would receive $78.20 per share, and approximately point two two Ramsay sante shares. The Ramsay board views the alternative proposal as inferior and determined not to engage further with the Consortium on the alternative proposal. Looking to the week ahead, the euro area core inflation print will be released which is forecast to be 4.1% year on year up point 1% from the previous reading. There are a few important data points from the US to look out for next week, including the consumer confidence measure for August, which is forecast to be 98.2 up from 95.7. Previously, the US manufacturing PMI print, which provides a gauge on the level of economic activity in the manufacturing sector. And A reading above 50 indicates an overall expansion of the manufacturing economy. The August reading is expected to be 52.6 down point two from July.

The non farm payrolls is forecast to be 290,000 down from approximately 500 30,000 in July. We will also see the US unemployment rate later in the week. The July reading was 3.5% and analysts expect it to remain unchanged. And finally, Australian reporting season will wrap up this week with a few companies left to report their full year 2022 results. Thank you for listening and we will see you next week.