15 MAY 2023 – Monday Market Highlights – Transcript

Nick Morgan
Good morning, it’s Monday the 15th of May and I’m Nick from Milford.

Looking at the key economic news from last week:
Starting in the US, we had both headline and core CPI increasing 0.4% m/m for April, in line with market expectations. This brings the annual inflation rate to 4.9% slightly below consensus of 5%. Looking at the subcategories in more detail, food price inflation grew at a slower rate, energy costs continued to fall and importantly, shelter costs, a large weight in the CPI basket, also slowed for the first time in 2 years from 8.2% to 8.1%.
We also had the Producer price index out in the US, a data set that measure the change in selling prices received by domestic producers. Prices increased 0.2% m/m compared to expectations of 0.3% and following a 0.4% drop in March.
Finally in the US we had the University of Michigan consumer sentiment survey out for April. The preliminary data a showed a sharp fall to 57.7, down from 63.5 in March and below expectations of 63. The preliminary consumer expectations numbers were also weak falling to 53.4 from 60.5 in march and below expectations of 59.8. The soft print continuing to illustrate consumers concerns about the direction of the economy.

In the UK we had the March GDP numbers out coming in slightly below market expectations at 0.3% y/y vs expectations of 0.4%. The bank of England also had their interest rate decision last week, deciding to raise the bank rate 25bps to 4.5%, in line with consensus. The market continues to price in another full hike at the next meeting and likely another hike following.

Moving across to China, The April headline inflation print came in below expectations at 0.1% y/y compared to market expectations of 0.4%. Looking at the subcategories both food and non food prices continued to ease. Continuing in China, we saw credit growth slow materially in April with new yuan loans at coming in at 718.8b about half of what market was expecting. The weak credit growth and aggregate financing potentially pointing to soft underlying growth in the economy and the need for the peoples bank of China to continue easing.

In Australia we had federal budget out on Tuesday. The package details included a 4 year $14.5b package to help households and small businesses with the increasing cost of living pressures. They are targeting reduced energy costs, healthcare reforms and sector specific wage growth. The budget included a large allocation to clean energy industries such as renewables, CCS and hydrogen and supported industries such as primary steel, cement, lime, and alumina to decarbonise. Lastly in Austrlai we had the final retail sales numbers out for March, increasing 0.4% m/m, unrevised from the preliminary reading and up from 0.2% in February.

Turning to Equity news:
Allkem, an Australian listed lithium company with assets in Argentina has announced plans with Livent to merge in an all stock merger of equals, forming a new company with a market cap of approximately US$10.6b . There appear to be plenty of synergies between the 2 companies and the stock closed up c15% on the day.

Silver Lake Resources revised their bid to buy the Leonora assets from St Barabara. The total value was the same but split included more scrip that St Barabara could hold on the BS to provide liquidity. The new bid also addressed various concerns with regards to timing and conditionality. Silver Lake are currently waiting for a response from St Barabara which is expected to be in the coming week.

CSR, a building products provider for residential and commercial construction reported their FY23 result which was strong than the market expected. The beat was primarily driven by the building products section, with aluminium and property in line with guidance. They did give weaker Fy24 guidance on aluminium than expected which would have been taken negatively by the market.

Looking at the week ahead:
On Tuesday we have the RBA minutes, the commentary around the decision to hike will be important for the market.
We also have the employment data out in the UK, with consensus estimates unchanged for the unemployment rate at 3.8%.
On Wednesday we have US retail sales with the market estimating 0.7% m/m compared to -0.6% for march.
On Thursday we have the Aus employment data out, with the market expecting employment change to increase by 25k people and for the unemployment rate to remain unchanged at 3.5%.

Thanks for listening, we will see you next week.