The Aussie ASX 200 snapped a seven-week losing streak last week. The last time it experienced a stretch of weekly declines this long was during June and July of 2008.
Australian Share Market (ASX 200) – up 3.2% and snapping a 7-week losing streak with the sharp rise last week recovering much of the March losses. Gains were broad based on a bounce from oversold levels with all sectors higher led by Materials (+7.01%), Utilities (+3.89%) and Info Tech (+2.75%). Risk sentiment was much improved following the banking mini crisis that dominated the month with swift action from regulators, and the general view that bad management was the underlying issue for Silicon Valley Bank and Credit Suisse rather than broader systemic issues for Banks. Economic data was in focus ahead of the Reserve Bank of Australia meeting tomorrow. Retail sales growth slowed to 0.2% in February, down from the 1.80% increase in January. Our new monthly inflation data showed the CPI rising 6.8% for the year in February, lower than expectations for a 7.2% increase and down from January’s 7.4% annual rate. It was the 2nd monthly decline in a row from the recent high of 8.4% in December. The main detractors were recreation and culture, automotive fuel, and new dwelling purchases. The main contributors came from clothing and footwear, education, and electricity. Although still at very high levels, the lower-than-expected CPI combined with slowing retail sales figures boosted views the RBA may pause when they meet next week following 11 straight monthly hikes. The news late in the week that home builder Porter Davis had gone into administration saw the market factor in a possible pause in rate hikes. Our quarterly jobs vacancies report from the Australian Bureau of Statistics showed vacant jobs still at very high levels historically with 438,500 job openings, down 1.5% on last quarter. For perspective there were 220k vacant jobs in early 2020 before the pandemic with the labour market remaining very strong overall, despite the 11 rate hikes since May last year when Job vacancies peaked at a record high 480,300.
U.S. Share Market (S&P 500) – up 3.48%, with the Dow (+3.22%) and Nasdaq (+3.37%) all higher for the second week in a row. Bank stocks led early in the week as the Silicon Valley Bank clean-up continued with First Citizens Bank agreeing to take on all the deposits and loans of SVB. In testimony to the Senate Banking Committee, the Fed Vice Chair for Supervision said that SVB’s failure was a “textbook” case of mismanagement with the Federal Deposit Insurance Corporation saying the SVB failure could cost its Deposit Insurance Fund around $20 billion. Economic data was largely better than expected and equity volatility fell to the lowest in several weeks. Bond market volatility also fell but remains at historically high levels. U.S consumer confidence and the Richmond Fed index beat expectations, as did the February pending U.S home sales index posting another surprise increase for the month. The report capped off a month of better-than-expected US housing market data with Bloomberg’s Housing and Real Estate Market Surprise Index hitting the highest levels since late 2020. Analysts highlighted tailwinds from lower mortgage rates on falling bond yields, ongoing strong housing demand, and the surprise decline in inventories. Although Q4 GDP growth was revised slightly lower in the final estimate, from 2.7% to 2.6% growth. The Personal Consumption Expenditure price index (the Federal Reserve’s preferred measure of inflation) rose 0.3% for the month, in line with expectations, and slowing from January’s surprise 0.6% monthly increase. The Core PCE price index was up 0.3% for the month, below expectations for 0.4% and down from January’s 0.6% increase, with the reading boosting equities on Friday night. It is likely we have moved into the phase of higher volatility in inflation. Where instead of constant rises like we saw in 2021 and 2022, we see more of these large swings in monthly inflation like we have seen already in 2023. The week capped off a strong month for U.S equities, and a positive first quarter with focus likely returning to bottom-up fundamentals rather than top down macroeconomics as Q1 reporting gets underway shortly.
Apple (AAPL) launches buy now pay later service in U.S. Apple launched their new “Apple Pay Later” service in the U.S. last week, allowing users to split purchases into four payments, spread over six weeks with no interest and no fees. Users can also apply for Apple Pay Later loans of between $50 to $1,000, which can be used for online and in-app purchases made on iPhone and iPad with merchants that accept Apple Pay. Apple said they will begin inviting select users to access a pre-release version of Apple Pay Later with plans to offer it to all eligible users in the coming months.
CVS Health (CVS) to close $ 8billion Signify deal. CVS Health said they completed the acquisition of healthcare services company Signify Health last week. The companies entered into a definitive agreement in September 2022 with CVS Health acquiring Signify Health for $30.50 per share in cash for a total transaction value of approximately $8 billion. Upon completion of the acquisition, Signify Health will continue to operate as a payor-agnostic business as part of CVS Health. Signify Health is a leading health care platform that leverages advanced analytics, technology, and nationwide healthcare provider networks to create and power value-based payment programs.
Diageo (DGE) CEO steps down – Appoints first female CEO. Beverages giant Diageo announced last week that current CEO Ivan Menezes is stepping down after 10 years in the role. With Debra Crew, who is currently the company’s Chief Operating Officer, being promoted to the role from July 1. Debra Crew will be the first female CEO in the company’s history. She joined the company in 2019 as a non-executive director before assuming the role of president of Diageo North America in July 2020. Diageo is the fourth-largest alcoholic drink company by market cap, with $19 billion in revenue and $4.2 billion in profits in 2022 and is currently the seventh-largest member of the FTSE 100.
The Week Ahead
Domestic economic data releases this week include Building Approvals and Housing Finance today. The highlight of the week is the RBA meeting tomorrow where a pause after 11 straight monthly hikes is expected with the cash rate to hold steady at 3.6%. It’s a shortened trading week with the ASX closed for Good Friday.
International highlights include Japan Tankan index and China manufacturing PMI today. Tonight sees U.S Construction Spending and ISM Manufacturing and Eurozone PPI. Tomorrow night is U.S Factory Orders and the JOLTS job openings report. Wednesday night is U.S Services PMI with China Services PMI and German Industrial Production on Thursday. The highlight of the week is the U.S Nonfarm Payrolls report on Friday night where another 230k jobs are expected to be added and the unemployment rate expected to hold steady at 3.6%.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
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