A recent consumer survey found that Australians plan to spend an average $1088 on gifts this Christmas, with $427 on gifts for immediate family, $246 for extended family, $149 for friends and $266 for themselves. This includes 40% more for electronics compared to last year, 16% more for household goods and 16% more for clothing, footwear, and accessories.
Australian Share Market (ASX 200) – up 3.44% for the 3rd week in a row. Offshore leads were strong as the Federal Reserve guided for additional rate cuts next year. The REIT sector (+5.33%) led the gains again, a key beneficiary of lower rates followed by other high P/E sectors Info Tech (+4.8%) and Healthcare (+4.16%). It was a strong week for equities as bond yields fell further with no sectors lower. The Westpac-MI consumer sentiment index rose to 82.1 in December from 79.9 in November with the rebound largely due to the RBA rates hold decision with the assessment of family finances improving although consumer sentiment remains deeply pessimistic. The report noting that 2023 was the second worst for consumer confidence on record, largely due to cost-of-living pressures. The NAB business confidence index fell more than expected to -9 in November from -3 in October and the lowest since the pandemic, largely due to negative sentiment in retail and recreational services. The Business Conditions index dropped to +9 in November from +13 in October. Inflation indicators picked back up with labour, purchase costs, and final prices, all rising during the month, reversing some of the prior month’s declines. The Mid-Year Economic & Fiscal Outlook showed the federal budget in better-than-expected shape with projected budget deficits down by a cumulative $40B over next four years, largely on a $65B boost to federal revenue since May mainly due to low unemployment and high commodity prices. Australian employment surged by 61.5K jobs in November, smashing estimates again for a 11.5K increase and up from October’s large 55.0K gain. It was a strong report with jobs growth driven by a 57K surge in full-time positions. A stronger than expected increase in the participation rate saw the unemployment rate rise from 3.8% to 3.9%, the highest since early 2022 and now above the RBA’s year-end forecast of 3.75%. The underemployment rate also rose, and monthly hours worked have settled around levels back in May with markets now anticipating RBA rate cuts, which was the dominant theme driving equities higher last week.
U.S. Share Market (S&P 500) – up 2.49%, with the Dow (+2.92%), and Nasdaq (+2.85%) also higher. The S&P 500 and Nasdaq were up for the 7th straight week. The Dow hit an all-time high with the S&P 500 less than 2% away from its January 2022 record close. Gains were broad based with the Russell 2000 mid cap index up 5.55% for the week. Equities rose on the November CPI report that was largely in line with expectations – up 3.1% for the year, down from 3.2% last month and the lowest annual increase since March 2021. Headline CPI rose 0.1% for the month slightly higher than the forecast of no change. Core CPI was up 0.3% for the month as expected, increasing from October’s 0.2% monthly pace with Core CPI up 4.0% for the year also in line. Gasoline down 6% on the month was a big headline detractor with Shelter still the largest factor in rising core. US equities surged following the FOMC meeting with no change in rates as expected and Fed Chair Powell continuing the recent dovish narrative from last month. Powell acknowledged inflation has eased over the past year and the Fed will be data dependent in determining extent of any additional policy firming, while guiding for increased rate cuts next year with the new dots (Summary of Economic Projections) showing an expected 75 basis points of cuts by the end of 2024, up from the 50 basis points of 2024 rate cuts at the last update in September. US equities were higher again as the 10yr treasury yield fell below 4% for the first time since July following the dovish FOMC meeting. Economic data was OK, supporting the “soft landing” narrative. November retail sales up 0.3% for the month were stronger than expectations for a 0.2% contraction with annualized retail sales up 4.1% the highest since February. With the November data improving on the soft October data, the Atlanta Fed’s GDP Now estimate for Q4 growth hit its highest level yet of +2.6% last week, up from the measly 1.2% Q4 GDP growth expected at the start of the month.
Intel (INTC) announces launch of new AI products. At its “AI Everywhere” launch in New York last week Intel introduced an unmatched portfolio of AI products to enable customers’ AI solutions everywhere – across the data centre, cloud, network, edge and PC. The Intel Core Ultra mobile processor family, the first built on the Intel 4 process technology and the first to benefit from the company’s largest architectural shift in 40 years, delivers Intel’s most power-efficient client processor and ushers in the age of the AI PC. The 5th Gen Intel Xeon processor family is built with AI acceleration in every core, bringing leaps in AI and overall performance and lowering total cost of ownership (TCO). Intel CEO Pat Gelsinger also showed for the first time an Intel Gaudi3 AI accelerator, arriving on schedule next year.
National Australia Bank (NAB) and Jarden Wealth to launch New Zealand wealth & asset management business. NAB announced they and Jarden Wealth have agreed to combine their New Zealand wealth advice and asset management businesses into a newly formed entity in which NAB, Jarden Wealth and Pacific Equity Partners (PEP) will be the shareholders. The proposed transaction will bring together NAB’s JBWere New Zealand and BNZ Investment Services Limited businesses, together with Jarden Wealth and Harbour Asset Management to create a leading advice and asset management business for clients in New Zealand with a combined 113 advisers, NZ$29bn of funds under advice and administration and NZ$15bn of funds under management, including NZ$5bn of KiwiSaver funds under management.
Rio Tinto (RIO) provides update on Simandou – Production due in 2025. At their investor strategy day last week, Rio Tinto provided an upbeat outlook and outlined detailed plans for their Simandou joint venture project. The iron ore buried in Guinea’s Simandou mountains is among the world’s largest untapped deposits of the commodity. Rio Tinto said it expects to spend roughly $6.2 billion to develop its share of the project with production expected to begin in 2025. And that “Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development.” The Iron ore price has been remarkably strong this year, hitting a year high of US$137 a tonne last week.
The Week Ahead
There are no major domestic economic data releases this week. International is also quiet with just US Durable Goods Orders and Personal Consumption Expenditure on Friday night.
There is an annual general meeting for ANZ on Thursday.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
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