17 APR 2023 – Monday Market Highlights – Transcript

Roland Houghton
Good morning, its Monday the 17th of April, and I’m Roland from Milford.

The key economic news last week was the US inflation data which came in at 5% y/y, slightly softer than the 5.2% expected.
Core inflation however came in bang inline with consensus at 5.6% for the year or 0.4% m/m.
This monthly inflation print annualises at 4.8% which is still well ahead of the feds target range.
US PPI was also released which came in well below expectations, actually falling 0.5% m/m. This is the price received by domestic producers of goods and services so generally leads headline inflation metrics.
Retail sales were released in the US which fell by 1% m/m more than the 0.4% contraction expected as consumption continues to normalise.
The FOMC minutes were released and there wasn’t much surprising in them, however they did highlight a 50bps increase was considered but the issues in the banking sector held them back. Also, some staff members had forecast a mild recession later on this calendar year.
Domestically, Australian employment data came in much stronger with total employment growing 53k vs 20k expected and the UR remaining flat at 3.5% vs 3.6% forecast.
The participation rate continues to hover around record levels and increased slightly m/m to 66.7%.
Interestingly, the working age population increased by 2.3% y/y – this is well above the natural rate of inflation and although may still be recovering from covid, it also likely reflects the significant step up in immigration.
On this note, Australian arrivals and departures data was released and although it doesn’t perfectly track actual net migration it is a guide. It came in very strong as the recovery in travel and immigration continues and point to potential record migration levels should current trends continue.
Another key development in Australia was the potential thawing of relations with China as China is now reviewing the tariffs imposed on Australian Barley. As a reminder, this tariff is 80% and was implemented in 2020.
There is hope that this will open the discussion around the current wine tariffs which can be as much as >200%
Turning to equity news

Wesfarmers sold their final stake in Coles worth $688m – this was done at a very tight discount of only 0.6%.
Newmont, the giant global gold miner made a revised bid for Australian listed gold miner NCM. The prior bid would see Newcrest shareholders receive 0.38 Newmont shares for every 1 Newcrest share. They increased this ratio to 0.4 and said they’d allow a franked share of US$1.10 to be paid prior to deal implementation. This is the second time they’ve sweetened the deal.
Given the takeover is tied to the shareprice of Newmont, the deal value is moving around. As of close of Friday, this deal valued Newcrest at Australian $31.16 which is about a 39% premium to where Newcrest was trading prior to the receipt of the first bid on the 6th of Feb.
GQG, a listed fund manager in Australia who manage global equities released an update highlighting FUM grew to US$94.5b from $91b a month earlier.
Whitehaven coal released a quarterly update and downgraded guidance across the board.
Production is expected to be 5.5% below, managed coal sales to be 9% below, equity coal sales to be 8% below and unit cost of coal to be 5% higher than prior assumptions.
This was due to a range of factors but predominately due to labour shortages and operational issues at one of their mines.
They do still have $2.7b of net cash which equates to 44% of their market cap.
Looking to the week ahead

On the economic front it’s relatively quiet.
On Thursday, NZ’s inflation data is to be released with the market expecting a 1.8% quarterly increase in prices, an acceleration of the 1.4% experienced in the December quarter. This would take annual inflation to 7.2%.
Japanese inflation is also released this week with the market expecting 3.1% core annual inflation.
US earnings season continues to ramp up and we will monitor company commentary closely to determine how different sectors are faring.

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