Around $36.3 billion in dividends declared during the reporting season will be paid out over the next few weeks, matching last year’s record first half dividend amount.
Australian Share Market (ASX 200) – down 0.30% for the 4th week in a row and giving back half of the impressive early year to date gains. The Energy sector (+5.18%) led with Materials (+0.47%) the only other sector higher boosted by some much stronger than expected China PMI data coming out of lockdowns. The REITs (-3.37%) led the declines followed by Financials (-2.88%) and Telecoms (-2.46%) with higher bond yields weighing on equities with our 10 yr. government bond yield hitting 3.91%. With our first half reporting season now over, the bottom-up company fundamentals were pretty good with around $36.3 billion in dividends declared during the reporting season to be paid out over the next few weeks. This amount is in line with the same period a year ago although the composition changed slightly. Dividend downgrades did outnumber upgrades and the rate of dividend growth has flatlined but considering the backdrop of heightened market volatility and the aggressive interest rate hikes this is a decent number. The expected market dividend level has fallen mainly due to the big iron ore miners reporting lower profits and higher costs from the year ago period but the dividend characteristics of companies outside the ASX 20 have improved further. January retail sales bounced back 1.9% for the month last week, ahead of consensus for a 1.5% gain and reversing some of December’s unexpectedly sharp 3.9% decline. Discretionary categories led the rebound with spending on cafes and restaurants hitting a new record high. Our Q4 GDP growth was slower than expected coming in +0.5% for the quarter and below estimates for +0.8% with lower household consumption weighing on the quarterly result, likely due to cost-of-living pressures. Although Q3 was revised up to +0.7% from +0.6% with annual GDP growth in Q4 of 2.7% in line with expectations. The new monthly Australian inflation report showed annual inflation at 7.4% in January, below expectations for 8.0% and down from 8.4% in December but remains far too high ahead of tomorrow’s RBA meeting where another 25 basis point hike is widely expected.
U.S. Share Market (S&P 500) – up 1.90% and snapping a 3-week losing streak with the Dow (+1.75%) and Nasdaq (+2.58%) also higher. U.S equities found some support last week after the February decline that gave back some of the large January gains as inflation data came in higher than expected and bond yields climbed. The U.S 10 yr. treasury yield topped 4% last week before easing back with a significant lifting of the yield curve indicative of bond pricing moving to a higher for longer inflation outlook. U.S housing data continued its recent improvement with pending home sales up for a second month and well ahead of estimates although are still down 24.1% for the year as the housing sector bore the brunt of last year’s rate hikes. Durable goods orders fell more than expected, the biggest decline since April 2020, but came on the back of a large gain in December. Internals were good with ex-transport, ex-defence and aircraft, and core capital goods all ahead of estimates. The February ISM manufacturing report showed contraction for the 4th month in row but improved from last month with the prices-paid component seeing a big increase and moving back into expansion territory and breaking a 4-month streak of decelerating prices. The weekly initial jobless claims were again lower than expected, holding below 200K and near the 2022 cycle lows for almost 2 months with no signs yet of any labour market weakness from the rate hikes to date. There were still areas of weakness though adding to the uncertain outlook with the Dallas Fed Index, Consumer Confidence, the Chicago PMI and Richmond Fed Index all weaker than expected. U.S Federal Reserve messaging maintained a foot in each camp with Atlanta Fed President Bostic saying he favours a 25-basis point hike at this month’s meeting, and is expecting the lagged effects of the rate hikes to start to bite over the next few months, and for the Fed to then pause. Although Fed Governor Waller said the Fed may need to push rates higher if the recent and unexpected pick up in the labour market and economic data persisted.
Google’s (GOOG) Waymo to test run driverless taxis. The Google owned self-driving technology company Waymo has said they will begin testing its autonomous taxi without a human safety operator in Los Angeles in the next couple of weeks. Initially only employees will be able to hail rides in the driverless robotaxis with the company mapping several LA neighbourhoods and services will only available outside peak hour. Waymo currently operates a commercial robotaxi service in the city but can only charge passengers for rides when a human safety operator is in the front seat. The company is still awaiting the final permits it needs to charge for driverless robotaxi services.
Lloyds (LLOY) share buyback commences. Lloyds has wasted no time commencing the buyback they announced with their better-than-expected full year results, appointing UBS as the broker, and commencing the program. The broker will purchase the Company’s ordinary shares and sell them on to the Company in accordance with the terms of their engagement. The Company intends to cancel the shares it purchases through the programme. The maximum consideration is £2 billion. The programme has already commenced and will end no later than 29 December 2023. The sole purpose of the programme is to reduce the ordinary share capital of the Company which has the effect of improving per share ratios.
Microsoft (MSFT) adds upgraded Bing search engine to Windows computer software. Microsoft announced it is adding its recently upgraded Bing search engine to its Windows computer software as part of the Windows 11 update. The new Bing browser is the one that incorporates the new Artificial Intelligence from their partner and maker of ChatGPT. Microsoft’s operating system will include the new Bing in desktop computers’ search box, which is used by half a billion people per month. The search engine itself is still in a preview mode, accessible to more than 1 million people in 169 countries. In addition to the new Bing, Microsoft’s Windows update will also include software that can connect to iPhone messages and calls for the first time but is only starting with a limited set of users.
The Week Ahead
Domestic economic data releases this week are a bit light on with just the Balance on Goods and Services tomorrow, along with the Reserve Bank of Australia’s interest rate decision where another 25-basis point hike to 3.60%, the 10th hike in a row, is widely expected. We will likely get more context on Wednesday when Governor Lowe delivers the keynote speech at the AFR’s Business Summit.
Internationally we have Eurozone Retail Sales and U.S Factory Orders tonight. German Manufacturing data is tomorrow along with U.S Consumer Credit tomorrow night. China New Loans and Money Supply is Wednesday along with German Industrial Production and U.S JOLTS Job Openings on Wednesday night. China CPI and PPI are Thursday. Bank of Japan Interest Rate decision is Friday along with U.K Industrial and Manufacturing Production. The highlight of the week is the U.S non-farm payrolls on Friday night where another 200k jobs are expected to be added and the unemployment rate to hold at 3.4%, the lowest since 1969. Federal Reserve Chair Powell will also provide monetary policy testimony before the Senate Banking Committee on Tuesday and the House Committee on Wednesday.
Corporate reporting continues to wind down with both the ASX and U.S Q4 reporting seasons now largely over, but with several our companies going ex-dividend.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
The information presented in this publication is general information only, and is not intended to be financial product advice. It has not been prepared taking into account your investment objectives, financial situation or needs, and should not be used as the basis for making an investment decision. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and financial circumstances.
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.