4 December 2023 | Weekly Snapshot

Did you know?

The Nasdaq was up almost 11% in November. There have only been 3 other months in the past 10 years when the Nasdaq has returned +11% with 2 of those seeing further gains the following month.



Market Movements

Australian Share Market (ASX 200) – up 0.46% on positive offshore leads and lower bond yields. The Info Tech (+2.3%), Health Care (+2.25%), and Real Estate (+1.19%) sectors led the gains while Utilities (-2.51%), Energy (-2.34%) and Consumer Staples (-0.25%) were the only sectors lower. Markets closed out November with some historic monthly gains. US Treasuries had the strongest month since the 1980’s and it was the best month for global bonds since 2008. There were large gains in risk assets with the MSCI World Index up 9% in November while our ASX 200 was up 4.52% for the month. Gold closed at a record high, but more speculative assets also saw outsized gains with Bloomberg’s Crypto Index up 18% and junk bonds attracted record ETF inflows. The volatility index (VIX) hit the lowest since prior the pandemic and the US dollar index saw the biggest monthly fall in a year. It was quite a month. Aussie retail sales unexpectedly shrank 0.2% for the month in October last week, missing expectations for a 0.1% increase and easing back from September’s 0.9% jump that contributed to the November rate hike. Retail turnover was down in all categories except for food. Some commented that the October weakness could reflect consumers waiting for the Black Friday / Cyber Monday sales in November that are becoming increasingly popular. The monthly inflation indicator showed October inflation rising 4.9% for the year last week, lower than the 5.2% rise expected and down from September’s 5.6% pace. Underlying inflation also rose at a slower rate of 5.1%, from 5.5% last month. The headline result was driven by a steep fall in automotive fuel, down 2.9% for the month while other components like clothing and footwear prices declined. The most significant contributors were Housing, Food and non-alcoholic beverages, and Transport. There is practically zero chance of a December rate hike tomorrow although a Q1 rate hike is still on the cards but will depend on the incoming data – employment, retail sales, this week’s Q3 GDP, and Q4 CPI – all due ahead of the RBA’s first meeting of 2024 in February.

  

U.S. Share Market (S&P 500) – up 0.77%, with the Dow (+2.42%), and Nasdaq (+0.38%) also higher for the 5th week in a row. Data was generally soft again last week, with the Q4 data coming in notably slower with the Atlanta Fed’s GDP Now estimate for Q4 GDP growth falling to just 1% in the latest estimate. Although not entirely surprising to be hitting an air pocket in Q4 considering how strong Q3 was with the 2nd estimate for Q3 GDP last week revised even higher to +5.2%, up from the way stronger than expected +4.9% initially reported. The weaker data recently, translating to lower bond yields, has been a key rally driver as bad news became good news for equities – the opposite of what we saw (good news being bad news) from August to October. New home sales, The Dallas Fed Index, and the ISM manufacturing index were all weaker than expected and the weekly Continuing jobless claims was the highest in two years. Consumer confidence was steady although the expectations component jumped. Pending home sales fell less than expected, and the Chicago PMI surged back into expansion territory for the first time in over a year, and Construction Spending was also better than expected. The October PCE inflation report was cooler than expected with annualized PCE of 3.0% and Core PCE of 3.5% both the lowest reads since early 2021. The slower data saw markets ramping up expectations for 2024 rate cuts (the Pivot) last week, with pricing now for around 100 basis points of Fed rate cuts in 2024. Federal Reserve speakers were prevalent with Fed Governor Waller saying he was increasingly confident that policy is well-positioned to slow the economy and get inflation back toward the 2% target. Fed Chair Powell’s speech on Friday capped off the dovish takeaways, commenting that policy rates are “well into restrictive territory” marking a notable shift from recent comments that policy settings might not be as restrictive as thought. The 10yr treasury yield fell further with the major US equity indices closing the week at or near their 2023 highs.



Portfolio Movements

Freeport (FCX) processing fees reduced. Freeport had a decent session on Friday as they reportedly reached an agreement with Chinese smelter Jiangxi Copper for 2024 copper concentrate treatment and refining charges at $80 a metric ton and 8 cents per pound. That’s around a 9% reduction in processing fees taking some pressure off Freeport’s margins. Reports noted several major Chinese copper smelters including Jiangxi Copper and China Copper have agreed to reduce treatment and refining charges paid by miners after the closure of First Quantum Minerals’ mine in Panama caused concerns about supply to Chinese smelters.

   

Lloyds (LLOY) to write back £500 million early next year. Reports that Lloyds could reap a windfall worth more than £500m early next year following a deal that will see loans repaid in full by the owners of The Daily Telegraph and write back more than £500m on the value of a £700m loan extended years ago. In addition to the £700m value of the principal loan, the borrowers are also reported to be paying more than £400m in interest which has accrued over many years. The outcome would be significant for Lloyds and its CEO Charlie Nunn, who had rejected a series of partial repayment offers from the after the Telegraph’s holding company was placed into receivership earlier this year but calls into question why it was written off originally. The writeback would be pure profit, straight to the bottom line, and could pave the way for a significant capital return to shareholders.

   

Ramsay (RHC) Healthcare provides Q1 update at AGM. Ramsay, Australia’s largest private hospital operator, hosted their AGM during the week and provided a Q1 update that highlighted some encouraging trends, albeit with ongoing inflationary and margin pressures. Ramsay said activity at its Australian private hospitals continued to improve, although wage costs remain a headwind. U.K. volumes lifted in 1Q as private patient backlogs unwound further. Although Ramsay now expect a higher tax rate. Management seemed cautiously optimistic, despite several challenges. The Aus & UK operations showed promising trends with strong volume growth; however, France continues to be a concern due to persistent cost inflation and less effective government support.



The Week Ahead

Domestic economic data highlights this week include Q3 Business Inventories and Company Profits, and monthly Housing finance today. Q3 Current Account, New Motor Sales and the final RBA meeting for the year are tomorrow where no change is expected. Q3 GDP data is Wednesday where the economy is expected to grow 1.9% for the year.

International highlights include Eurozone Sentix Economic Index and US Factory Orders tonight. Japan Tokyo CPI is tomorrow along with China Caixin Services PMI. Eurozone PMI is tomorrow night along with US ISM Services PMI and the JOLTS Job Openings. German Manufacturing, Eurozone Retail Sales and US ADP Employment Survey is Wednesday night. China Trade Balance is Thursday with US Consumer Credit Thursday night. Friday sees China Loan Growth with the highlight of the week being the US non-farm payrolls and unemployment rate on Friday night with expectations for another 172k jobs added and the unemployment rate to hold steady at 3.9%.

There are no Portfolio companies reporting 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.