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Full year 2022 dividends (interim plus final) from the recent ASX reporting season came in at $92 billion, up from the $70 billion paid out in full year 2021.
Australian Share Market (ASX200) – up 0.96% and snapping a 2 week decline on positive offshore leads as global equity markets found some support following the post Jackson Hole decline. The Materials sector (+5.13%) led the gains, bouncing back from the prior week’s ex div decline. Info Tech (+3.83%) and Health Care (+0.78%) were the next best while Utilities (-1.95%) led the declines followed by Consumer Staples (-1.52%) and Financials (-0.89%). The Reserve Bank of Australia hiked the cash rate another 50 basis points, the 5th straight month of hikes, and the 4th 50 basis point hike in a row in what is the most aggressive monetary policy tightening since 1994. The policy statement said the rate increase will help return inflation to target and create a more sustainable balance of demand and supply in the economy and repeated that they still expect to increase rates further over coming months but are not on a pre-set path and will remain data dependent. Our Q2 GDP growth came in stronger than expected with the Aussie economy growing 3.6% for the year, ahead of the 3.4% expected and accelerating from the 3.3% annual rate in Q1. Strong household consumption added 1.1% to growth, driven by increased spending on services as lockdown restrictions eased further. Net exports added another 1.0% to growth on stronger mining shipments. Although cost pressures continued to build with employee compensation growth the highest in 12 years amid skilled labour shortages. After hiking rates on Tuesday, RBA Governor Lowe gave a speech on Thursday noting the case for a slower pace of rate hikes has become stronger as the cash rate has risen so quickly. The comments seemed to play into views the RBA could slow the pace of hikes to 25 basis points next month and that the current 2.35% is also nearing the RBA’s neutral rate estimate of “at least 2.50%”. Markets are currently pricing in a terminal rate of 3.75% by mid next year although economists anticipate the cash rate will peak at a lower level around 3.00%. The ASX rallied on the prospects of smaller rate hikes with a 1.77% gain on the day, the best since July.
US Share Market (S&P 500) – up 3.65%, with the Dow (+2.66%) and Nasdaq (+4.14%) also higher and snapping a 3-week losing streak. It was strong week for US equities with every sector higher. A rebound from oversold conditions and depressed sentiment and positioning over recent weeks were the most likely factors. The economic data has also been a bit better than expected recently and raising what are currently slim hopes that the world’s largest economy could pull off the soft landing. The August ISM Services unexpectedly rose to 56.9, well ahead of the expected decline to 55.0 and was the highest since April. New orders accelerated to 61.8. The prices index fell for a 4th month but is at a still high 71.5. The business activity index rose 1.0 point to 60.9, while the employment index edged back into expansion territory for first time since May with further evidence of underlying strength in the US labour market as the weekly initial unemployment claims fell again to a new 3 month low. The oil price dipped below US$82 a barrel and the lowest since January supporting the peak headline inflation narrative and there were meaningful moves in both currencies and bonds during the week. The US 10 yr. treasury yield made a new 3-month high of 3.35% that weighed on equities early in the week, and the US dollar index made a new 20 year high. The Euro slipped to a new 20 year low against the USD, dipping below 99 cents before finding some support as the European Central Bank raised interest rates by 75 basis points last week, the top end of the expected range, and the largest hike on record. The British pound became the latest major currency to make a historic low against the USD, hitting the lowest level since 1985. The surging USD pulled back late in the week taking the recent pressure off stocks, gold, oil, and other commodities. There were also several Federal Reserve speakers out last week all keeping in line with the post Jackson Hole narrative that interest rates are on a “raise and hold” and “higher for longer” path.
Amcor (AMC) announces “lift off” seed capital winners to help drive the revolution in packaging. Amcor is a global leader in packaging products and solutions with 44,000 employees operating in 43 countries and US$15b in annual revenue and is at the forefront of developing and producing responsible packaging solutions. Last week they announced the first batch of recipients for its new Amcor Lift-Off seed funding initiative launched in April that provides US$250,000 to start-ups with cutting edge innovations for a more sustainable future for packaging. The 2 companies to receive the awards were Bloom Biorenewables: A chemical and biomaterials company, which converts plant waste into chemicals used in packaging. And Nfinite Nanotechnology: An advanced materials company, which leverages smart nanocoatings to make packaging recyclable and compostable.
Linde (LIN) to increase green hydrogen production in the US. Linde is the world’s largest industrial gas company with annual revenue of US$31b. The company’s primary business is the manufacturing and distribution of atmospheric gases. Last night they announced they will build a 35-megawatt PEM (Proton Exchange Membrane) electrolyzer to produce green hydrogen in Niagara Falls, New York.
The new plant will be the largest electrolyzer installed by Linde globally and will more than double Linde’s green liquid hydrogen production capacity in the United States. Linde will build, own and operate the industrial scale electrolyzer and use hydroelectric power to produce green liquid hydrogen. This project is the first of several electrolyzers Linde expects to build in the U.S. to address green liquid hydrogen demand.
CVS Health (CVS) to acquire Signify Health for around US$8 billion. CVS Health has reached a deal to acquire in-home health-care company Signify Health for about $8 billion. Signify is a provider of technology and services for home health care that has also attracted take over interest from United Health and Amazon in recent months. CVS will pay $30.50 a share in cash for Signify, an acquisition that would build on its growing health-care services. “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience,” CVS Health CEO Karen Lynch said. The companies expect the acquisition, which is subject to regulatory approval, to close in the first half of next year.
The Week Ahead
Domestic data this week includes NAB business confidence tomorrow and consumer inflation expectations on Thursday. Our unemployment data also Thursday is the highlight of the week with the unemployment rate expected to hold at the 48-year low of 3.4%.
Internationally, the focus will be back on inflation this week with CPI data from the US tomorrow night, UK Wednesday night, and Eurozone Friday night. China new loan growth is today, UK industrial production tonight and German ZEW sentiment data tomorrow night. Thursday night sees a raft of data out of the US including Empire state index, Philadelphia Fed index, retail sales, capacity utilization and industrial production, with business inventories Friday night. The highlight though is tomorrow night’s US August CPI data. Estimates are for a 0.1% monthly decline in headline CPI after a flat reading in July, with the yearly reading dropping to 8.1% from 8.5% in July. Lower energy prices are likely to drag on headline inflation although core CPI is expected to increase 0.3% for the month with the yearly reading moving back up to 6.1% from 5.9% which would be the highest since April.
There are full year results from VGI Partners tomorrow and their Asia fund (VG8) on Friday as several companies continue to go ex-dividend following the full year reporting season.