January 23, 2023

23 JAN 2023 – Monday Market Highlights – Transcript

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Monday Market Highlights

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Roland Houghton
Good morning, its Monday the 23rd of January and I’m Roland from Milford.

Australian employment data was released for the month of December and was weaker than anticipated.
Total employment fell 15k m/m compared to an expected increase of 22k.
The Unemployment Rate increased to 3.5% from 3.4%.
This softer print gave some market participants confidence the RBA would slow rate hikes however employment still remains incredibly tight.
Again in Australia, the Westpac consumer confidence index was released and improved m/m to a reading of 84. Although an improvement is positive, it still remains below 100 which implies widespread pessimism remains.
The Bank of Japan held one of the most hotly anticipated meetings where they presented their plan around Quantitative Easing and Yield curve control.
The BoJ have held rates near zero for years and recently allowed rates to move withing 50bps of this target, an increase from 25 basis points.
This was a big move so everyone expected the Bank of Japan to continue tot step away from YCC however much to everyones surprise, BoJ Governor Karoda reinforced their commitment to keeping rates low.
This saw the Japanese Yen weaken across most major currencies.
US PPI fell 50bps m/m in December compared to an expected 10bp fall. This is generally a leading indicator for inflation and hence we should continue to expect overall inflation to come, at least in the near term.
US Retail sales were also weaker than expected. Excluding auto, retail sales fell 1.1% vs 0.4% expected.
Turning to equities, news flow is starting to accelerate as companies either report their quarterlies or provide trading updates should they choose to.

We had JB Hi Fi and Super Retail report very strong trading updates implying at least in their categories demand remains elevated. On the other hand, City Chic and Baby Bunting reported disappointing updates and hence, positive outcomes for retailers will likely be quite company specific as margins come under pressure.
Viva and ampol, who each control the only two oil refiners in Australia reported generally solid updates.
Convenience sales and retail fuel volumes remained buoyant and for Viva they achieved a very strong refining margin of ~$15 compared to $11.75 for Ampol.
Fisher and Paykel Healthcare released another positive trading update, increasing their revenue guidance about 5-9% ahead of consensus.
There’s some conjecture as to whether some of the benefits are one off or enduring however they are clearly working through the excess invengtory in the hospital system built up during covid.
Netwealth / PPS and Hub, the three key independent specialist wrap platforms all released their quarterly flow results and all disappointed.
HUB performed the best followed by Netwealth and Praemium. Although flows remain positive, the momentum has lessened given the market volatility causing system flows to slow.
Looking to the week ahead

We will likely continue to see companies report quarterly updates or trading updates ahead of February reporting as they get their accounts for the key December trading period.
This will provide very timely insights into how the consumer is coping with a rapid tightening of financial conditions.
We will see Q4 inflation data for Both Australia and NZ released on Wednesday. The market expects 1.6% quarterly inflation for AU and 1.3% quarterly inflation for NZ.
In the US there’s a range of data being released this week including GDP estimates for Q4 but most of the attention will be on the Core PCE index to be released on Friday evening our time.
This is the feds preferred measure of inflation and the market is looking for 0.3% m/m core PCE inflation.

Thanks for listening, we’ll see you next week.

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