30 JAN 2023 – Monday Market Highlights – Transcript

Kate Power
Good morning it is Monday the 30th of January, and I am Kate from Milford.

Last week, the Australian 4th quarter CPI print was stronger than expected coming in at 7.8% compared to consensus of 7.5%.
Breaking it down, we can see food inflation is still accelerating, growing by 9.2% in the quarter, household goods inflation moderated. And services inflation accelerated with the 6-month annualised inflation lifting from 4.5% to 7.6%
As a result, The current market pricing has increased the likelihood of a 25bps rate hike in February to 76% vs around 50% in the prior week.

There were also a few data points out of the US last week, including:
US GDP up 2.9% qoq stronger than consensus expectation of 2.5%,
US durable goods orders up 5.6% verse consensus of 2.5% and much stronger than November print of negative 3.1%.
And finally, US core PCE index rose by 0.1 percent month on month in December, the same as in the previous month. Services prices increased by 0.5 percent while prices for goods declined further by 0.7%.
Overall, the stronger-than-expected US data, points to a resilient economy and consumer.

In equity news:
Leading Australian medical device company, Resmed reported its second quarter results for FY23.
Top line revenue beat consensus expectations driven by increased production and delivery of flow generator devices to meet the strong demand from customers, resulting in strong sales, particularly in the US.
However, gross margin decreased by 80 bps, mainly due to unfavourable product mix and foreign currency movements, partially offset by an increase in average selling prices.
Overall, ResMed delivered a strong result and modest beat verse consensus.

Origin Energy provided a trading update, whereby they upgraded their EBITDA expectations for the Energy Markets division by about 15%.
The improvement in the Energy Markets division is driven by an expected increase in natural gas and electricity gross profit due to good operating and trading performance, as well as improved coal delivery under legacy contracts.
However, they downgraded the AP LNG EBITDA guidance by 3.5% driven by production impacts from the cumulative effects of wet weather earlier in the fiscal year.
They also noted no material impact is expected on Energy markets earnings as a result of the introduction of the $12 per gigajoule price cap on uncontracted gas.

Turning to US markets, Tesla reported a mixed result last week with a revenue beat, but price cuts caused their gross profits to fall.
However, the CEO, Elon Mush provided bullish comments – noting that “demand far exceeds production” and that the company is “seeing orders at almost twice the rate of production”.
These comments lead to the stock ending up 10% on the day and is now approximately 50% up from its January lows.

Turning to the week ahead.
Look out for the Euro area monthly inflation print and the ECB’s interest rate decision.
The market expects the ECB to raise rates by 50bps in February and rates to peak at 3.2% by August 2023.
The US ISM manufacturing PMI print for January is due this week and is forecast to be down 0.2%, representing the third consecutive month below 50%, indicating that the manufacturing economy is generally declining.
Importantly, we will also get the US interest rate decision. The Fed is expected in raise rates by 25bps to 4.75%.
And finally, over to New Zealand, the 4th quarter unemployment rate will be released which is expected to remain unchanged at 3.3%.

Thank you for listening and we will see you next week.