7 NOV 2022 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday, the seventh of November and I’m Kate from Milford. This week, the Fed increase their cash rate by 75 basis points to a policy rate between 3.75 and 4%, which was in line with expectations. But the market focused on the board’s commentary whereby they anticipate ongoing increases in the target rate range to be sufficiently restrictive to curb inflation. But they did highlight the large impact on the economy of its rapid pace of rate hikes. The language indicated that a slowdown in the pace of rate hikes is likely, but overall remained hawkish and reaffirmed the committee’s strong commitment to returning inflation to its 2% objective. Markets initially rallied with the comments on anticipated slowdown in the pace of hikes. But this was short lived, as the commentary became hawkish. The s&p 500 ended the day down 2% and the Nasdaq down 2.7%. Additional data from the US this week included the unemployment rate, which increased by point 2% to 3.7%. In October, this was up from 3.5% in September, and was slightly above market expectations of 3.6%. Additionally, the US economy added a stronger than expected 261,000 jobs in October above market forecast of 200,000. These data points suggests economic conditions remain largely robust and as such, the pressure remains on the Fed and its policy decisions. Turning to the Aussie market, the RBA increase the cash rate by 25 basis points, which was well expected by the market. The RBA continued that dovish tone, despite them materially revising up their inflation forecast for the end of 2023 by 50 basis points to 4.75%, suggesting inflation will be higher for longer. And finally on economic news, Australian real estate data house CoreLogic showed house prices fell by 1.2%. In October, capital cities fell 1.1% which is a slowdown in the pace of declines, but it’s still annualizing at negative 13.2%. Turning to equity news, several companies reported their September quarterly updates this week, starting with Woolworths, which saw group sales up 1.8% however, Australian food sales were down 1.1% on a like for like basis, which was below consensus. New Zealand also remains weak with sales down 2.5% But Big W sales were strong up 30% But this was against a weak COVID impacted previous period. Global Industrial landlord Goodman group reported quarterly net property income growth of 4%, which was in line with expectations. The update showed no sign of slowdown in demand for industrial land despite the slowing global economy, resulting in assets under management up 7% to $78 billion. In other equity news, CSL hosted its annual r&d day, providing a detailed review of its various clinical development programs. Internal efforts and the vie for acquisition have seen the r&d pipeline grow by about 70% year on year. With the majority in late stage programs. These late stage programs will be a key catalyst for the stock moving forward. Looking to the week ahead, we can expect the Westpac consumer confidence index, which evaluates the financial health of Australian households, which has been on a downward trend since December last year and is expected to continue this month. Later in the week in the US. We will see the inflation print, which is expected to increase 50 basis points month on month. And finally the US midterm elections will be held this week. The polls currently show the Republican Party is favored to win control of the Senate and the House. Thank you for listening, and we’ll see you next week.