6 MAR 2023 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday, the sixth of March. And I’m Kate from Milford.
In economic news last week, headline durable goods auto in the US was weaker than expected at negative 4.5%. However, the drop was largely related to a large decline in commercial aircraft orders in the US, the print x transportation was up point 7% Stronger than consensus of point 1%. Overall, US factories to business equipment increased in January by the most in five months, suggesting demand is not weakening. More data from the US including isn manufacturing PMI data was below expectations with a headline of 47.7 however, there was a big tick up in New orders, although it is still negative. Also prices paid had a big jump back into positive territory after four months below 50 which lines up with the upside surprise on inflation that we are seeing. Finally, in the US the services PMI was 55.1 in February, little change from 55.2 last month and above expectations of 54.5. Driving this month print was fast increases in new orders. New export order inventories increased unemployment also price pressures eased production pressures slowed and supply deliveries fell in Europe, core inflation reached 5.6% up from 5.3%, keeping the pressure on the ECB to continue the rate hike cycle moving to Australia fourth quarter GDP expanded point 5% quarter on quarter below consensus of point 8% The full year growth rate reached 2.7%. household consumption slowed as interest rates start to bite, slowing 2.3% and the household savings buffer continues to fall a saving rate declined to 4.5%. This was north of 20% in the depths of COVID-19. Finally in economic news, Australian retail sales bounced back in January after an unexpectedly large fall in December. January sales were up 1.9% month on month compared to 1.5% expected however, there is volatility in monthly sales prints compared to history as a result of new promotional patterns with the rise of Black Friday and Cyber Monday sales, which likely resulted in a pull forward of demand from December to November. Despite the volatility in the data. The detail in the January sales points to household spending starting to weaken in equity news reporting season came to a close last week. Overall earnings disappointed with net misses and strong net downgrades aggregate. EPS fell less than 1% in February, but as 7% of the 2022 peak in real terms, and outlook changes have been broadly negative with only 18% EPS upgrades and 32% EPS downgrades a few key themes from reporting season include one the consumer is starting to look weak, with stocks such as JB Hi Fi, Harvey Norman and Wesfarmers reporting weakness from the consumer. Secondly, the housing sector is getting weaker, and several of the residential developers are relying on a strong second half result to meet expectations. Thirdly, inventory keeps climbing, which raises concerns when the consumer slowdown is just beginning. And finally the cost of debt is rising materially companies exposed to floating rates so large increases in the cost of debt. Turning to the week ahead. The RBA will provide its interest rate decision for March consensus expects a 25 basis point rate rise, bringing the cash rate to 3.6%. However, we believe most interest will be in the guidance that Governor provides in his statement announcing the decision. As we saw in the February statement, the change in wording was interpreted to be more hawkish. So we will be watching the march statement closely for guidance. Next week. Fed Chair Powell will testify on the US Central Bank’s semi annual monetary policy report to the Congress. Finally your area of fourth quarter GDP growth rate will be released. It is forecast to be point 1% quarter on quarter and 1.9% year on year. Thank you for listening and we will see you next week.