19 JUN 2023 – Monday Market Highlights – Transcript

Roland Houghton
Good morning, its Monday the 19th of June, and I’m Roland from Milford

It was a busy week on the economic front.

However the key news was the anticipated hawkish pause by the US fed.
The US central bank decided to keep rates on hold however they did point to at least two more rate hikes to come.
Many are taking this as a sign they are at or near pausing permanently, not necessarily believing that there will in fact be more hikes.
In addition, the fed increased their GDP growth forecasts for this calendar year as the economy has held up much better than feared.
This was aided by slightly softer US inflation data.
Headline inflation grew 4% y/y vs 4.1% expected.
Core inflation which excludes volatile items like energy, increased 5.3% – inline with expectations.
The monthly core inflation growth of 0.4% is still well above the fed’s target,
However the PPI data was also released which was weaker than expected at -0.3% m/m vs -0.1% expected. This generally leads inflation, so the market has taken the fed pause, the inline inflation, and weaker PPI data as a sign the worst of inflation and rate tightening is behind us.
Finally in the US, retail sales also came in slightly better than expected at +0.3% m/m vs -0.1%.
Closer to home, AU employment was released and was much stronger than anticipated, with 76k jobs added vs 15k expected.
The participation rate also increased to a record high but despite this, the UR fell to 3.6%.
Strangely, hours worked was very weak, falling 1.8 m/m.
NZ GDP data was released, which showed the economy contracted for a second straight quarter which is generally the loose definition of a recession.
GDP contracted by 0.1% q/q and the December quarter contraction of 0.6% was increased to 0.7%.
The BoJ released their IR decision and kept rates on hold at -0.1%. There has been essentially no change in approach by the BoJ despite a new governor being in the seat.
Turning to equity news

CSL released updated guidance for FY23 which was roughly inline with consensus however the focus was in their maiden FY24 guidance.
This was much softer than anticipated with the company expecting to grow earnings by 10-14% compared to market estimates of 24%.
This saw CSL fall 7% on the day an it finished down 9% over the week.
AGL hosted a strategy day and updated their guidance which saw consensus upgrades.
This saw AGL jump 10% om the day.
Region the shopping centre REIT, updated their property valuations which saw valuations fall by 1.7% for the 6 months to June. Their WACR expanded to 5.85%.
Charter hall and their listed vehicles also released updated property valuations.
Offices fell 3.7%, long WALE retail fell 7.8% and Shopping Centres fell 2.5%. Their industrial and social infrastructure assets increased by 0.1% and 0.8% respectively.
Xero updated the pricing of their ANZ suite of products with an approximately 10% weighted price rise.
This should lead to modest consensus upgrades.
Dominos pizza came out with a weak trading update highlighting a softening consumer. Although LFLs were positive they were much lower than their target 3-6% p.a.
The market is concerned about their elevated ND/EBITDA of 3x given the macro headwinds. To resolve some of these concerns Dominos is exiting their loss making Denmark business.
DMP fell 6% on the day.
Finally Macquarie Telecom raised $160m to fund future data centre developments – citing strong demand for collocated DC services and that they’re expecting strong demand from AI compute – albeit this is yet to appear.
Looking to the week ahead,

Its lighter on the economic front however we do have the BoE interest rate decision where they’re expected to raise rates to 4.75%, UK And Japanese inflation data, and finally the RBA meeting minutes which should provide some clarity on how the RBA is thinking about inflation and monetary policy.
Outisde of this we do expect more trading updates to filter through as companies have the majority of their financial year trading under their belt.
If they are deviating too much from stated guidance they will ened to update the market.
This provides timely insights to how the economy is evolving and absorbing the record rate hikes in Australia.
Thanks for listening, well see you next week.