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Good morning, it’s Monday the 31st of July and I am Kate from Milford.

It has been a busy week in economic news:

In the US we had more evidence of a resilient economy with:
US growth unexpectedly accelerated in the second quarter, with the economy expanding by 2.4%
Durable goods also outpaced expectations
Consumer spending slowed less than predicted
The PCE price index also offered good news on inflation, accelerating at a slower pace than forecast
And the Fed’s preferred inflation gauge, the PCE deflator, dropped sharply to 3% yoy, but the core reading came in at 4.1% verse 4.2% expected.
And Jobless claims came in well below consensus.
Finally in US economic news, The FED raised the official cash rate by 25 basis point to a range of 5.25% to 5.5%, which was a unanimous decision. This is the highest fed funds rate in 22 years

In Australia, the focus this week was on the CPI print which slowed to 0.8% q on q and 6% y on y. this was below consensus of 1% qoq or 6.2% yoy and below the RBAs expectations. The softer CPI print saw RBA rate hike expectations shift from approximately a 50% chance of a 25-basis point hike in August to around a 20% chance.

Also good news for inflation, was softer retail sales print in June, with discretionary categories of departments stores down 5% and clothing and footwear down 2.2%, weighing heavily on the 0.8% decline from May.

Finally in economic news, the Bank of Japan has given the bond market more freedom by loosing the yield curve control. The central bank has widened the range for 10-year Japan government bond purchases to 100 basis points, up from 50 basis point.

In equity news

Approximately 50% of the S&P 500 have reported, with around 80% reporting positive EPS surprises and 64% have reported positive revenue surprises, although this is off earnings which were revised lower leading into earnings season.

Off the back of this strong earnings results and positive economic data, The US markets had a strong end to the week, the S&P closed up 1%, Nasdaq up 1.9% and Russell up 1.4% on Friday.

In Aussie equity news, Megaport reported their quarterly result which was in line with expectations. The company reported positive net cash flow of $2.3m, Average recurring revenue was up 6% q o q, decelerating from the previous quarter, The services segment grow 11% q on q and reported lower churn.

Finally in equity news, Macquarie Bank held their 2023 AGM, which noted a slow start to the year with weaker trading conditions in the first quarter leading to net profit contribution being substantially down on the pcp. The was driven by both the annuity style and market facing businesses.

Turning to the week ahead.

Domestically the focus will primarily be on the RBA’s August policy meeting on Tuesday, where consensus expects the RBA to continue their hiking cycle by taking the cash rate to 4.35 per cent. However, consensus is almost balance with only 14 out of 25 economists expecting a hike while the bond market pricing only implies around a 20% probability.

The RBA will also release its update economic forecasts in its statement on monetary policy at the end of the week.

In the US the focus will be on US labour market data including JOLTS and Payrolls data

And finally, the Bank of England will provide its rate decision.

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

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