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Episode details

Brendan Larsen
Good morning. It’s Monday 19 September, and I’m Brendon from Milford Asset Management. Inflation was once again the dominant factor driving markets last week, with us CPI printing at 8.3%. year on year for August, versus market expectations of 8.1%. markets reacted poorly to this print, with the s&p 500 declining over 4% The worst single day since June 2020. This inflation reading likely reinforces the existing hawkish rhetoric from the Fed, who will meet on Thursday morning to set interest rates where the market is fully pricing a 75 basis point rate hike with a small chance of a 100 basis point rate hike. Continuing with the inflation theme, headline UK CPI came in at 9.9% year over year in August, a touch under market consensus at 10%. The main factor behind the fall and the annual rate was a 6.8% drop in fuel prices in August, reducing the headline level by 1/3 of a percentage point. Core CPI, which is generally considered stickier inflation came in ahead of market expectations at 6.3% versus 6.2% led by services inflation, which printed at 6% year on year from 5.7% in July. This pickup in services is likely attributable to a tight labor market and higher energy input costs. Given UK inflation is currently five times the Bank of England target of 2%. We expect further hiking at this week’s delayed meeting. The government’s decision to freeze household energy bills potentially weakens the case for a 75 basis point hike, but a 50 basis point hike is widely expected by the market. Elsewhere, we had Australian employment numbers for August. The size of the labor force increased by 47.5 1000 While the gain and employment was 33.5 1000, resulting in both an increase in participation to 66.6% but also an increase in the number of unemployed people. This saw the unemployment rate ticked up by 1/10 of a percentage point to 3.5%. At the margin, the report was slightly softer than expected, given ongoing impacts of the current COVID outbreak on workers availability. We also had the NFIB survey out, which highlighted optimism among us small businesses picked up in August by the most since June 2021. Among other things, the report highlighted less bad business conditions in August, moderating output prices and a continued tight labor market and equity news, Atlas citeria announced a fully underwritten one for 1.95 accelerated non renounce double entitlement offer to raise approximately $3.1 billion. The proceeds of the offer are being used to fund the acquisition of a 66.67% majority interest in Chicago Skyway, a 12 and a half kilometer toll road with 81 years of remaining concession life. Atlas arteriors biggest shareholder IFM investors said it was disappointed with the deal and that was considering all legal options available to them. Link administration fell 20% On Tuesday, after day in Durham city I had received a warning notice from the UK Financial Conduct Authority regarding its proposed purchase of link. The regulators won’t approve the deal if Diane Durham doesn’t cover any shortfall and the value of Link Fund solutions assets and similar news. Ramsey healthcare fell over 10% On Tuesday, after the consortium led by KKR indicated it won’t improve the terms of a takeover proposal. This comes on the back of Ramsay’s results the prior week, with KKR stating that the result implied meaningful downward pressure on the proposed valuation. And the week ahead, the major focus will be on central banks with the key event being the FOMC on Thursday morning Sydney time. The market is fully priced for a 75 basis point hike. But after the CPI beat last week, some in the market are calling for a 100 basis point rate hike. We also have the Bank of England this week, where as alluded to the market is pricing a 50 basis point hike. UK Chancellor quiet Tang is also expected to hold an emergency mini budget on Friday, where he is thought to announce further fiscal support in the form of tax cuts to help offset mounting bills. Elsewhere, we get RBA minutes, New Zealand consumer confidence and global s&p PMIs Thank you for listening. We’ll see you again next week.

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