October 10, 2022

10 OCT 2022 – Monday Market Highlights – Transcript

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Monday Market Highlights

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Will McVeagh
Good morning. It’s Monday the 10th of October and I’m Will from Milford. The ASX 200 posted its biggest weekly gain in nearly two years last week. After rising 4.5% a speculation around a possible central bank pivot came to the fore. Macro drivers continue to dominate the markets focus, as company news takes a backseat. all asset classes were volatile, with the Australian 10 year government bond trading in the 30 basis point range, while the Australian dollar finished the week at two year lows. While markets became optimistic on central banks slowing the current aggressive hiking cycle early in the week. There was little evidence outside Australia to support this fit speakers were quick to reiterate that they will continue raising interest rates aggressively, as they haven’t seen any evidence that inflation has peaked, or labor markets are reason. Friday night’s us nonfarm payrolls reinforce this message and put to bed any optimism on earlier slowing of rate hikes. The US added 263,000 new jobs in September and beat on expectations while the unemployment rate fell to 3.5%. From 3.7%. The market was expecting tight labor markets are a key concern for central banks globally. And this data did nothing to allay those fears that we could be seeing a wage price spiral taking hold. It’s not often Australia gets much focused on the global economic stage. However, Reserve Bank Governor Phil Lowe certainly got that post his very dovish statement at the October RBA board meeting last Tuesday, lo shocked markets when he decided to raise rates by 25 basis points, even though the market almost fully priced 50 basis points with a statement that was out of tune with all other major central banks. The governor noted that there are no set path of raising interest rates and would watch for further data to guide any decisions. Importantly, they removed reference to raising rates in the coming months, which opened the door for speculation that we may see a pause and rate rises at the next meetings. They also noted that much of the recent tightening was yet to flow through to the economy. And they viewed that the outlook for the global economy had deteriorated recently, equities ripped, the currency fell sharply and bonds rallied aggressively post the meeting and sharp contrast to Australia. The RBNZ had raised rates by 50 basis points to 3.5% at the meeting last week, and gave every indication that they will keep raising rates rapidly. The statement emphasize that core inflation remains high and labor markets tight, which requires the central bank to continue tightening until consumer spending slows to bring inflation back into the target band RBNZ. Like almost every other central bank besides the RBA, a concern that if they don’t stamp out inflation in a timely manner, it can become entrenched and cause larger problems. Aside from the key central bank news last week, global oil markets were also a focus as crude jumped over 15% during the week, OPEC announced a larger than expected 2 million barrels a day cut to quote as from November, as the oil cartel seeks to keep oil prices elevated. The US is trying to counter the supply shocks by releasing oil from the strategic petroleum reserves. However, it’s not clear how long they can continue with this. Many investors and now picking the oil could trade back above $100 A barrel in the near future, which would cause further headaches for central banks and the fight against inflation. The sicker Australian job index was released for September last week, showing Ed volumes falling 5.2% month on month. The fourth consecutive decline as applications per job ticked up, job EDS and are 10% below the mate peak but remain 53.5% above pre pandemic levels. Hospitality and Tourism and retail continue to see the lowest number of applications per ad, as labor shortages continue to be problematic. However, there is some hope that this data could be the start of an easing in labor markets. And stock news last week, fund manager Magellan shares fell sharply on Thursday after releasing this timber monthly funds under management. total fund fell from 57 point 6 billion in August to 50 point 9 billion in September, with 3.6 billion and outflows. It’s quite a fall from grace Magellan hovered over 113 billion and farm only 12 months ago, as investors have continued to pull the cash post poor performance and the departure of key staff including founder Hamish Douglas. The stock fell 8.5% On the day and has fallen over 85% Since its 2020 highs.

Another company struggling last week was data company EPEN which downgraded EBIT da by 51% its third downgrade This year, epic has been hit hard by the decline in online ad spin globally, as global tech companies are forced to cut spending and the tough operating environment f1 was off 12% On the day of the announcement, and is down over 75% this year. This week, all eyes will be on the US CPI released on Thursday night. This will be key for markets to see whether the central bank tightening is having an impact on rampant inflation. As supply chain issues ease. The market will be looking for a small drop in year on year headline inflation to 8.1% from a point 3% with a monthly print of 0.2%. While core inflation the Feds preferred measure is predicted to rise to 6.5% from 6.3%. Previously, a large move either way is likely to see an aggressive market reaction, particularly after Friday night’s bumper job print. Thanks for listening. Have a great week.

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