29 MAY 2023 – Monday Market Highlights – Transcript

Good morning, its Monday the 29th of May, and I’m Roland from Milford.

The key economic news came out on Sunday, as apparently a deal to raise the US debt ceiling has been agreed in principle:
Details are still filtering through however it looks like the debt limit is suspended until Jan-2025, with defence spending to be up slightly, the age for food assistance to increase from 49 to 54, and would allow congress to impose a 1% spending cut across the board if annual appropriation bills are not implemented.
This still has to get through the house and the senate.
The RBNZ raised interest rates 25 basis points which was expected however the commentary highlighting they were at peak rates was a surprise. Many expected the RBNZ to point to more hikes ahead and therefore the dovish tilt saw the NZD fall 1.2% against the Australian dollar and the 2.3% against the USD.
UK inflation accelerated, increasing 8.7% y/y vs 8.2% expected. Core inflation also accelerated to 6.8% vs 6.2% expected.
UK 10yr GILT yields ground higher to 4.3% to end the week almost reaching the peaks in September last year as the market expects more rate hikes to be necessary to tame inflation.
In Australia, April retail sales data was released coming in flat m/m cs 0.2% expected. Household goods were particularly weak.
In addition, both the CBA and ANZ spending data was released, both of which corroboarated a slowing in consumption.
In the US, core PCE data was released, increasing 4.7% y/y, slightly ahead of 4.6% expected. Remember this is the feds preferred measure of inflation.
On a monthly basis this did increase a more manageable 0.4% albeit this too was slightly ahead of expectations. The big susprise was consumer spending which jumped a significant 0.8% m/m.
In addition, 2Q GDP estimates were released pointing to 1.3% q/q growth vs 1.1% forecast.
These two stronger than anticipated data prints saw US yields jump higher across the board as expectations for further rate hikes increased. The USD rallied against most major currencies last week.
Turning to equity news

The world was focused on the Nvidia quarterly result given it being considered the best proxy for the AI bubble or boom we are currently in.
The result did not disappoint with the 2Q revenue guidance coming in a massive 50% ahed of expectations.
Nvidia was up 24% on the day and is up 167% this year alone.
Universal stores the Australian apparel retailer provided a trading update which came in well belo market expectations.
They highlighted that sales had slowed markedly since April as the cost of living crisis was pinching their consumer cohort.
Analysts downgraded earnings for next year by 20-30%.
Universal fell 24% on the day.
Webjet on the other hand had a very strong result with NPAT 8% ahead of expectations citing strong European tourism demand.
Fisher and Paykel Healthcare released their FY23 results however the focus quickly turned to their guidance which came in >10% below consensus. This was primarily due to much higher opex growth than anticipated.
FPH fell 6.5% on the day.
Gentrack, a NZ small cap released a strong set of results posting another upgrade
Turning to the week ahead

The focus will be on any updates around the debt ceiling including further details on compromises each party has made.
IN the US the focus will be on non farm payrolls for May, where total jobs are expected to increase 195k and the UR is expected to come in at 3.5%, slightly higher than 3.4% for April.

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