21 AUG 2023 – Monday Market Highlights – Transcript

Good morning, it’s Monday the 21st of August and I’m Nick from Milford. Looking at the key economic news from last week:

Starting In Australia we had the minutes to the RBA’s August decision where they decided to leave the cash rate unchanged for the 2nd consecutive meeting. There was little new in the minutes, with the possibility of further tightening still on the table and future policy remaining data dependent.
We also had the Australian employment data out for July falling by 14.6K, below consensus expecting a 15K gain and in contrast to June’s 31.6K increase. It was the largest fall in employment year to date primarily driven by a drop in full time jobs. The unemployment rate also rose by more than expected to 3.7% in July, up from 3.5% in June and above consensus of 3.6%. The data potentially pointing to a loosening labour market.
In NZ we had the RBNZ’s interest rate decision out for August where, as expected, they decided to keep the OCR unchanged at 5.5%. The bank made it clear that they will need to maintain restrictive monetary policy for the foreseeable future to ensure that inflation sustainably returns to the banks targeted 1-3%.
Moving to the US we had the July FOMC minutes out where majority participants agreed that a 25bp hike was appropriate and that they continue to see significant upside risk to inflation which could require more tightening. The upcoming data will continue to dictate to path of monetary policy and the market will be paying lose attention to Powells speech at Jackson hole this week. US retail sales were also out for July coming in at 0.7% above consensus of 0.4% and indicating a healthy US consumer. V
Lastly In China we had various data points including Fixed asset investments, Industrial production and retail sales all coming in materially weaker than expected, continuing to depict a weakening economy in China. With GDP growth expectations going lower the market will be watching closely to see if China will implement any stimulus, and if so where it is targeted.

Turning to equity news, it was another busy week of reporting globally with the US and Australia ramping up and NZ just starting.

In the US we had some of the large retail names report including Walmart who had a solid Q2 result with sales in line with consensus and EPS coming in above expectations at $1.84 v consensuses of $1.71. Full year guidance was lifted slightly but implied a cautious outlook on the 2H which is likely warranted with the current economic backdrop. TJX reported a strong quarter beating expectations and raising FY24 EPS guidance as they likely continue taking market share.
Lastly in the US we had Ag equipment OEM Deere and Co report their Q3 earnings on Friday. It was a strong result ahead of expectations and guidance for 2023 was lifted. They gave positive commentary on margins and inventory levels, however the key concern for the market is the demand outlook for 2024 and the result was shadowed by concerns of the ag cycle peaking this year.
In Australia we had a raft of results including Carsales who had a strong result in line with consensus and gave FY24 guidance broadly in line with expectations. Their market share continues to grow in all geographies and with strong results in the US and Brazil.
Seek reported last week with a disappointing result and guidance materially undershooting expectations. The share price was weakness largely likely attributable to continued concerns around higher costs and weaker Asia growth.
In NZ we had Contact Energy report on Tuesday with a strong result driven largely by retail pricing gains. FY24 guidance was lifted and another positive being the company hinting towards a dividend increase in FY24 when the Tiwai contract negotiations conclude.

Looking at the weak ahead,

On the macro front, the key focus of the market will be watching Jackson hole next week starting on Wednesday in the US and going through to Friday where Fed Chair Jerome Powell will be speaking.
We have flash PMI’s out in the UK and US.
On the equity front it’s another very busy week with lots of companies reporting. In the US we have Lowes, NVIDIA and Intuit. In Australia we have IAG, Charter hall and ampol. And finally in NZ we have market heavyweights A2 and chorus.
Thanks for listening, we’ll see you next week.