27 November 2023 | Weekly Snapshot

Did you know?

According to an Adobe Analytics report, US online spending on Black Friday sales jumped 7.5% from last year to a new record of $9.8 billion.



Market Movements

Australian Share Market (ASX 200) – down 0.12% despite positive offshore leads. Energy (+2.07%), Financials (+0.92%), and Materials (+0.2%) were the only sectors higher while sectors that had led the strong month to date rally – Info Tech (-2.96%), REITs (-1.81%), and Consumer Discretionary (-1.54%) – eased back. The Materials sector got a boost as the Iron ore price hit a 9-month high last week around US$130 a tonne with the gains put down to several factors including the flurry of China stimulus announcements and some favourable supply dynamics with China port stockpiles at lowest in almost seven years. The RBA November meeting minutes last week showed renewed concern over elevated inflation. Members debated whether to hike or hold, opting to hike amid the risk of not achieving the inflation target by the end of 2025 and an accompanying risk of a rise in inflation expectations. They noted the impact of huge immigration fuelling rent inflation and output growth and that brisk services inflation, resilient households and consumers, and rising home values suggest financial conditions are not especially restrictive. Speaking at the ASIC forum also last week RBA Governor Bullock issued a separate warning about labour costs, arguing that in the absence of productivity growth, wage rises of ~4% as seen in the prior week’s Q3 Wage Price Index were on the high side. Adding that the sharp rise in labour costs was making it difficult to return inflation to the 2-3% target. CoreLogic reported Aussie house prices hit a new record high in November with their national home value index rising 8.1% from the January low. Prices fell -7.5% from the previous all-time high in April 2022, taking around nine months for the index to go from the prior peak to trough, and 10 months for it to reclaim a record high. Core logic put the V shaped recovery down to an imbalance between supply and demand with listings still 16% below the five-year average nationally while demand, based on the volume of homes sales, is trending roughly in line with the five-year average.

  

U.S. Share Market (S&P 500) – up 1.00%, with the Dow (+1.27%), and Nasdaq (+0.88%) also higher for the 4th week in a row and some large month to date gains with the Nasdaq up 11% so far in November. With 94% of S&P 500 companies having now reported Q3 earnings, the blended (year-over-year) Q3 earnings growth rate for the S&P 500 is now +4.3%, up further from the +3.7% when 80% of companies had reported, and a huge beat on the -0.3% decline expected at the beginning of reporting season. The Fed’s FOMC minutes from the November meeting were out with no surprises. Members noted further rate tightening could be on the cards if progress toward lowering inflation proves to be insufficient, but all participants felt the Fed should continue moving carefully. October existing home sales fell more than expected and the lowest since 2010. Inventory was up 1.8% for the month but still tight, down 5.7% for the year. The surging mortgage rates the past few months has seen buyers step back but also seen homeowners who are locked in on super low fixed rates not selling. The NAR noted still resilient demand for the reduced supply as prices continued to rise with the median sales price up 3.4% for the year. October durable-goods orders declined more than the expected with a large downward revision to September as recent data continues to come in softer following the super strong Q3 GDP growth although the weekly initial and continuing employment claims were lower than expected. Disinflation themes have reemerged this month and been a key driver of the equity gains although the final November University of Michigan year-ahead inflation expectations rose further last week to 4.5% and the highest since April with bond yields ticking back up late in the week. It was a shortened week due to the Thanksgiving holiday with strength still apparent in the US consumer as Black Friday online sales spending jumped 7.5% from last year to a new record of $9.8 billion according to an Adobe Analytics report.



Portfolio Movements

BHP (BHP) warns on Australia’s economic competitiveness. In a report last week BHP warned about Australia’s economic competitiveness and prosperity with the resources industry and governments currently at a crossroads on climate related policy. Australia has become the world’s leading mining exporter by scaling up commodities including iron ore and coal but needs to ramp up mining of nickel and copper and support nuclear power to get ahead and stay ahead, the company said. BHP reckons up to 140 new copper mines, 60 new nickel mines, 50 new lithium mines and 17 new cobalt mines will be needed by 2030 with the report noting Australia’s current share of global production is lower than its share of global resources in many future-facing commodities.

   

Lloyds (LLOY) reviewing up to 2,500 jobs. After reporting better-than-expected quarterly earnings last month, Lloyds Bank, Britain’s largest high street lender, is reportedly reviewing up to 2,500 jobs, mainly middle management roles as part of a consultation that is expected to be shared with staff this week. Sources noted that while 2,500 roles are being reviewed out of the 50,000 employees across the business, management hope the number lost will end up being lower. In response to the reports a Lloyds spokesperson said: “We are evolving our business to ensure we can do more for our customers and deliver the products and services they need. To achieve this, we’re delivering one of the largest transformations in UK financial services which includes reviewing how our business and technology teams work together effectively to deliver on our strategy and long-term growth.”

   

Treasury Wine Estates (TWE) completes Institutional placement. TWE announce the successful completion of the institutional component of its 1 for 9.45 entitlement offer related to the acquisition of California-based luxury wine brand DAOU Vineyards. Take-up across Asia Pacific-based institutional shareholders was approximately 96%. Tim Ford, TWE’s CEO, commented: “We are very pleased with, and appreciative of, the level of institutional shareholder support we have received for both the equity raising and the Acquisition of DAOU Vineyards. We are excited to complete the Acquisition and to bring the combined business to life in 2024. The Acquisition reflects the continuation and acceleration of our luxury-led portfolio premiumisation strategy.”



The Week Ahead

Domestic economic data highlights this week include Retail Sales tomorrow, and the monthly CPI indicator and Q3 Construction Work Done on Wednesday. Thursday sees Building Approvals, Private Sector Credit and Q3 Capital Expenditure.

International highlights include US New Home Sales tonight, with US GHFH Home Price Index and Consumer Confidence tomorrow night. Eurozone Business Climate is Wednesday night along with German CPI and US Wholesale Inventories. Thursday sees China Manufacturing and Non-Manufacturing PMIs with Eurozone CPI and US Personal Consumption Expenditure, Chicago PMI, and Pending Home Sales Thursday night. Japan Unemployment is Friday with US Construction Spending and ISM Manufacturing Friday night.

Portfolio company reporting is quiet this week with just Annual General Meetings for Ramsay tomorrow and VGI Partners 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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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.