7 AUG 2023 – Monday Market Highlights – Transcript

Good morning, its Monday the 7th of August and I’m Roland from Milford.

The RBA held their monthly committee meeting and decided to hold rates steady for a second straight month. Although there was less than a 10% chance of a rate hike at this meeting the market still took the news positively. The RBAs commentary was marginally more dovish but admit that more tightening may be needed..
They also released their quarterly statement of monetary policy which essentially highlights all the indicators they’re monitoring including a range of economic forecasts.
The forecasts were little changed but they did reinforce the two key risks they see to increasing inflation which are rising rents and the risk of labour productivity not improving like they expect.
China and Australian relations continue to improve with China dropping the Barley tariffs. As a reminder they imposed these tariffs in 2020 in retaliation to the Australian government supporting an investigation into the origins of COVID. It is estimated exports of Barley to China were A$1.2b.
In the US, the June Core PCE index was released, which showed this measure of inflation continues to moderate.
Core PCE increased 4.1% y/y compared to 4.2% expected and 4.6% in May.
On a m/m basis prices increased 0.2%, slowing from 0.3% in May.
This is the feds preferred measure of inflation.
The Michigan Consumer Sentiment survey was released and jumped to 71.6 from 64.4, the highest level since October 2021.
This did slightly miss expectations however highlights the increasing optimism in the US which is unsurprising given lower gasoline prices and higher equity markets.
A reading of <100 remains pessimistic.
Also in the US, ISM manufacturing data was released which was slightly softer than expected at 46.4 vs 46.8 anticipated. It did however improve marginally m/m.. A reading below 50 implies contracting manufacturing activity – this survey has implied contraction since November 2022.
Finally in the US, the monthly jobs was released which had something in it for the bulls and the bears. Total jobs added missed expectations coming in at 182k – one of the lowest prints for years.
However this could arguably be offset by higher than expected wage growth of 0.4% m/m and a tighter unemployment rate of 3.5%.
Turning to equity news

The ACCC has blocked the sale of Suncorps banking arm to ANZ. They were fearful it may lessen competition.
They actually said they weren’t satisfied it wouldn’t lessen competition.
Most believe their argument is tenuous and hence, ANZ are going to challenge the decision through the courts.
RMD released their 2Q earnings which missed cons. by about 7%. The strong revenue result was overshadowed by a weaker gross profit margin and higher opex.
Investors were led to believe gross margins were improving so the market was particularly disappointed in this softening.
It would have been flat if not for an fx headwind however the lack of it increasing was also put down to product, and geography mix.
RMD fell 10% on the day however fell another 20% in the US on Friday night albeit that’s quite an illiquid market.
TPG telecom confirmed speculation around the potential sale of some of their assets to Vocus who is owned by Macquarie infrastructure.
The scale of the transaction was a surprise to the market as they are considering selling their entire enterprise government and wholesale business, the accompanying infrastructure and what sounds like most of their fibre for $6.3b.
They’d be left with their mobile business, their macro towers and the nbn reselling divison.
TPG rallied 11.5% on the day although gave some of this back throughout the week.
Credit corp released their full year results which came inline with consensus.
Their FY24 guidance however disappointed coming in 10% below expectations which saw their share price fall . .
Credit corp fell 12.5% on the day.
Looking to the week ahead

Australian reporting season will be ramping up progressively through August which will provide great insights into how companies are managing these tricky economic conditions.
US inflation data will be released with economists expecting 0.2% m/m inflation for both core and headline inflation data. In addition PPI will be released for July and economists are also expecting a 0.2% m/m.
In the UK 2Q GDP data will be released with the market expecting 0.2% annual growth however June specifically is expected to increase a stronger 0.5%

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