16 October 2023 | Weekly Snapshot

Did you know?

In the 122 years since Federation, Australia has now held 45 referendums to alter the Constitution with only eight succeeding.

Market Movements

Australian Share Market (ASX 200) – up 1.39%, snapping a 3-week losing streak. Offshore leads were mostly positive, with global equities finding some support after the September decline. The mood was cautious on developments in the Middle East with geopolitical risks elevated and gold, oil, and government bond prices notably firmer. Equities started the week higher with positive takeaways from the prior week’s stronger than expected jobs data and there were some large US Q3 GDP upgrades with Bank of America and Goldman Sachs raising their estimates to a 3.7% seasonally adjusted annual rate. If correct, this would see Q3 GDP growing at the strongest rate since the December quarter of 2021. The IMF published its World Economic Outlook, the latest to reduce bearish calls saying risks to the outlook are more balanced than earlier in the year and now see an increasing probability of a global soft landing. Also, reports that Beijing is considering increased deficit spending to help meet annual growth targets was also viewed favourably. Equities also got a boost from dovish Fed speakers who observed the tighter financial conditions from the surge in bond yields of recent months may make further rate hikes less necessary, after guiding for a year end rate hike last month. Although the US inflation data last week was slightly higher than expected. Aussie consumer sentiment improved with the Westpac-Melbourne Institute Index of Consumer Sentiment rising 2.9% to 82 in October but still in deeply pessimistic territory. The mood around family finances and the outlook for jobs increased but are overshadowed by still high inflation and some renewed rate rise concerns. Aussie business conditions remained strong with NAB’s Business conditions easing 3pts to +11 index points, reversing a small rise last month. The three sub-components (trading conditions, profitability, and employment) eased but all remain above their historical average levels. Business confidence was steady at +1 helped by forward orders which are now back in positive territory and included some improvement in retail forward orders. The NAB survey also showed some positive signs for inflation with cost pressures and price growth easing in the month.


U.S. Share Market (S&P 500) – up 0.45%, with the Dow (+ 0.67%), and Nasdaq (-0.18%) mixed with inflation and Q3 earnings in focus. Inflation data was a bit higher than expected last week. The Producer Price Index (PPI) was up 0.5% for the month, higher than expectations for 0.3% but still only up 2.2% for the year. September headline CPI was up 0.4% for the month, above the 0.3% expected. Annualized headline inflation of 3.7% was also a bit above the 3.6% expected although core CPI up 0.3% for the month and up 4.1% for the year were in line with consensus. It was the stickier components that were higher than expected with Services, Shelter and Owner Equivalent Rents all up 0.6% for the month. While goods like used vehicles and apparel continued to fall. The September FOMC minutes were out last week with Fed members seeing policy as restrictive and restraining the economy as intended, although noted the data has been resilient with the economy still expanding at a solid pace. All agreed rates should stay restrictive for some time, while several argued the focus should shift from how high to raise rates to how long to hold rates. A majority said one more hike at a future meeting would be appropriate although bets that the Fed is done hiking have increased last week. Some major US banks reported Q3 with results that were largely better than expected, particularly around net charge offs and provisions with consumers and businesses seemingly handling the higher interest rates well. Net Interest Income upgrades also featured in the results. Six per cent of S&P 500 companies have now reported with 84% of the small sample reporting a positive EPS surprise and 66% reporting a positive revenue surprise. For Q3 2023, the blended annual earnings growth rate for the S&P 500 is expected to decline 0.3%, the 4th quarterly earnings decline in a row. The 3rd quarter is also expected to be the earnings trough, with analysts expecting Q4 earnings growth of 7.8% y/y followed by 12.2% earnings growth for 2024.

Portfolio Movements

Insurance Australia Group (IAG) reaffirms guidance. IAG reaffirmed FY2024 guidance and were fairly upbeat at their AGM last week saying they are seeing positive financial signals including improved underlying performance, retention rates remaining very strong, and are growing customer numbers.
In line with previous guidance they expect to achieve low double digit gross written premium growth and reported insurance margin in the 13.5%-15.5% range. They mentioned a relatively benign start to FY24 from a natural perils perspective, but maintained naturals perils forecasts with inflationary trends continue to be elevated across the business, particularly in motor claims.


Microsoft (MSFT) planning AI chip debut? Reports last week that Microsoft could debut its own artificial intelligence (AI) chip at its annual developers’ conference next month with the move expected to reduce Microsoft’s dependence on Nvidia-designed AI chips, which have become scarce due to high demand. The new AI chip, named Athena, is specifically designed for data centre servers, similar to Nvidia GPUs that Microsoft’s data centre servers currently use. The introduction of the Athena chip was reported months ago with OpenAI, backed by Microsoft, also looking to develop its own AI chips, providing more control over the supply and costs of their AI applications.


Novo Nordisk (NOVO) upgrades sales and profit guidance…again. Novo upgraded their Q3 sales and FY2023 sales and profit outlook again on Friday night with the updated guidance primarily reflecting higher full-year expectations for Ozempic volumes sold in the US, and gross-to-net sales adjustments for Ozempic and Wegovy in the US. FY2023 sales growth is now expected in the 32-38% range up from prior guidance of 27-33% provided in August. Operating profit growth (EBIT) is now expected in the 40-46% range, up from prior guidance of 31-37%. Novo is having a stellar year, now up 80% over the past 12 months with financial results for the first nine months of 2023 due early next month.

The Week Ahead

Domestic economic data highlights this week include the October RBA meeting minutes tomorrow, and Westpac Leading Index on Wednesday. The highlight of the week is the September labour force data on Thursday where another 20K jobs gain is expected.

International highlights include Eurozone Trade Balance, and US Empire State Index and Treasury Budget tonight. German ZEW Economic Sentiment is tomorrow night along with US Retail Sales, Capacity Utelization, Industrial Production, Business Inventories, and NAHB Housing Market Index. China GDP is Wednesday, with UK CPI and US Housing Starts Wednesday night. US Philadelphia Fed Index, Existing Home Sales, and Leading Indicators are Thursday night. Japan CPI is Friday with UK Retail Sales Friday night.

Portfolio company reporting this week includes Annual General Meetings for Treasury Wines today, Telstra tomorrow, and Transurban on Thursday. Rio Tinto, Bank of America, and Johnson & Johnson Q3 earnings are tomorrow. BHP Q1 and Woodside Q3 results are Wednesday. Santos Q3, Freeport Q3, and Transurban Q1 are Thursday. With Schlumberger Q3 results on Friday.

The US earnings season ramps up with 55 S&P 500 companies (including five Dow 30 components) scheduled to report Q3 results this week.

Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice

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Some numerical figures in this publication have been subject to rounding adjustments. Akambo Pty Ltd (including any of its directors, officers or employees) will not accept liability for any loss or damage as a result of any reliance on this information. The market commentary reflect Akambo Pty Ltd’s views and beliefs at the time of preparation, which are subject to change without notice.