11 June 2024 | Weekly Snapshot

Did you know?

Since the 1990s, the US government has been in a habit of spending more than it is collecting in tax receipts. The budget balance went from bad to worse when in 2017, courtesy of Donald Trump, the US corporate tax rate was reduced to a flat 21% alongside broad income tax cuts. Interest rates have since shot up above 5% and the USA, arguably, has a debt problem. How much of a problem? By 2024, US taxpayers will be paying more on their interest bill than Medicare benefits and defence.

Market Movements

The Australian market finished up 1.1% last week, led by the healthcare sector (up 2.6%) and the telco sector (up 2.7%). Ramsay healthcare was up 4.2% this week, although this retraced declines from previous weeks. Treasury wines also rallied 4% after some positive outlook guidance. Australia’s Q1 GDP figures were weaker than expected at just +0.1% for the quarter. The Australian Fair Work Commission announced a minimum wage hike of 3.75% for 2024/25, which was lower than last year’s 5.75% increase.

The European Central Bank and Bank of Canada both cut interest rates to 3.75% and 4.75% respectively.

China was reported to have stopped increasing their official gold holdings for the time being, which sent the gold price lower by 1.8% for the week.

In the USA, equities rose 1.2%, which was led by IT stocks, or more specifically, ‘AI’ stocks, with Nvidia up 10.4%. Like Australia, defensive sectors (i.e. Health, Communication services) rallied.

It was a big week for US economic data, which taken together, sent bond yields lower, which reflects an overall softening in the economic data. This data included:

• The manufacturing Index shrank in May to 48.7 from April’s 49.2
• The services index was strong, jumping to 53.8, which was well above the 50.8 expected and April’s reading of 49.4.
• Unit labour costs rose by 4% for Q1 (previous quarter was 4.7%)
• Job openings, which can be thought of more as a leading employment indicator fell to 8.06m vacancies, which was a decline from 8.36m in April.
• 272k new jobs were added in May, which is a very strong number, up from 165k in April.
• The unemployment rate rose from 3.9% to 4.0%.

Portfolio Movements

Treasury Wines reaffirms outlook and provides guidance

• Treasury Wine said they continue to expect mid-to high single digit EBIT growth in FY24, excluding the EBIT contribution from DAOU in 2H24.
• They are continuing to assess the future operating model for their global portfolio of Premium brands, which they are looking to divest. An update is expected in August.

SSE to start up UK’s ‘most productive’ wind farm

• UK utility SSE has started electricity production at the 443MW Viking Wind Farm in Scotland, which is expected to set a new record in terms of productivity.
• The Viking project is a 103-turbine onshore wind farm that will harness the excellent wind conditions in northern Scotland and is expected to produce enough energy to power half a million homes.

Verizon wins 10yr US Navy contract

• Telco giant Verizon announced they have been selected by the Department of the Navy to provide wireless devices and services. The total value of the contract is $2.67 billion over 10 years.
• Under the contract, military personnel and federal civilian agencies will receive cost-effective, best value solutions while meeting the government’s requirements for current and future wireless mobility services.

The Week Ahead

• Wednesday: United States inflation numbers, where the annualised pace is expected to remain stable at 3.4%. The US federal reserve is also expected to keep interest rates unchanged at 5.5%. Inflation and interest rates will work hand-in-glove. And markets will enjoy a boost, and vice versa, if interest rates start getting cut. Freeport McMoran will also report earnings, which should be boosted by the stronger copper price backdrop
• Thursday: Australia employment data where the unemployment rate is expected to fall from 4.1% to 4%. If the unemployment rate does fall, it will increase the odds of a rate hike. The market is currently prescribing a 20% chance of a rate hike in Australia this year. Tesla will report earnings, which are expected to decline in the face of rising EV competition and slower growth of EV vehicles.