Rate Hikes Back on the Table

Markets:

• A mixed week for equity markets with US tech leading global markets whilst the Australian monthly inflation print spooked local investors.
• In local stock news, Mineral Resources shares fell to a near two-year low with the company announcing it would close its Yilgarn iron ore mine in the Pilbara, which will see 1,000 employees lose their jobs.
• Myer shares rose strongly after the company announced a takeover bid for Premier Investments’ Apparel Brands clothing labels, including Just Jeans, Jay Jays, and Portmans.
• ResMed shares fell sharply after Eli Lilly announced that trials in their weight-loss drug were successful, meaning the drug had shown to have reduced sleep apnoea severity.
• Metcash reported a mixed result with financial year 2024 sales in line with expectations, a 4% profit miss, and somewhat cautious guidance.
• Uranium producer Paladin Energy shares fell after the company agreed to acquire Fission Uranium for $1.2 billion in shares at a 26% premium to Fission’s recent share price on the Toronto stock exchange.
• Discretionary retail stocks fell, some more sharply than others, following the surprise monthly inflation print. A combination of central bank missteps (too dovish) and unchecked government spending may see more pain for households and consumers if the central bank raises rates.
• The Japanese Yen fell to the weakest level since 1986, with renewed speculation that authorities will be forced to support the currency again. The Yen has now fallen more than 12% year to date, putting significant upward pressure on Japanese import prices.

Economics:

• Australia’s monthly inflation indicator rose by more than expected to 4% for the year, with the trimmed mean measure (excluding volatile items) rising to 4.4%. Both readings surprised on the up and showed little to no progress on the RBA’s inflation fighting front, with prices too high for housing, food, transport, and alcohol & tobacco components. Rate hikes now firmly back on the table.
• The number of Australian job vacancies fell by 2.7% in the three months to May, with the peak to trough decline now at 26%. The health care and social assistance sectors account for almost one in five job vacancies.
• Australia consumer confidence rose a little in May, with most components lifting. But it remained at very pessimistic levels.
• US manufacturing data showing improvement from May to June, coming in above expectations, with the services component also improving.
• US consumer confidence slipped in June with pockets of weakness in the economy increasingly more visible.
• Two key US house price indices showed a small increase in prior month levels. New home sales fell by 11.3% in May to a 619,000 annualised rate, coming in below expectations.
• Eurozone manufacturing data fell in June, coming in below expectations.
• A barometer of German business conditions declined in June from May, coming in below expectations of an improvement.
• Data showed robust activity for manufacturing firms in India, but future business expectations slumped for the manufacturing and services sectors.
• The governor of the central bank of India remains confident about the bank’s 7.2% growth projection for the economy, but maintained they have more work to do on the inflation front to bring it back to target.
• China’s industrial profits rose at a sharply lower pace in May, showing continued struggles for the world’s second largest economy.

Politics:

• The US Treasury Department added Japan to its “monitoring list” for foreign exchange practices but stopped short of labelling it a currency manipulator. Japan joins China, Germany, Malaysia, Singapore, Taiwan, and Vietnam on that list. Relatively easy to admonish other countries when you have reserve currency status.
• A measure of foreign direct investment in China declined for the twelfth straight month, showing the continued struggle they face to improve their appeal to overseas investors to boost growth.
• The Australian government is cracking down on unfair prices at the major supermarket chains, with potential multimillion-dollar fines for anti-competitive behaviour, which
  will apply to any company with sales of more than $5 billion (Coles, Woolworths, Metcash, Aldi).
• The European Union and China agreed to hold talks on the planned imposition of tariffs on Chinese-made electric vehicles.
• Israel Prime Minister Benjamin Netanyahu said they will very soon end the intense stage of fighting in Gaza and will focus on targeted operations against Hamas.