Markets
Equity markets shifted higher, after a few weeks of stagnation, buoyed by central bank rate cuts in Europe and Canada, and a US inflation print in-line with expectations.
In local stock news, fast-fashion retailer Lovisa shares fell sharply after the CEO surprisingly announced he would be leaving the firm over the next twelve months. The current boss of Smiggle, part of Premier Investments, will take over in a years’ time. Premier shares also fell.
Treasury Wines share price rose strongly after the company reconfirmed its 2024 financial year guidance dousing concerns there might be weakness in their American wine business.
Seek shares rallied after the company announced the sale of its majority stake in OCC Mexico and its 100% interest in Catho Online, its two Latin American operations for $128 million, which will help reduce debt.
Mineral Resources announced they are selling 49% of the Onslow Haul Road to Morgan Stanley Infrastructure Partners for $1.3 billion.
OPEC+ agreed to extend most of its deep oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound from October onwards.
Economic
Australian economic growth continues to weaken with inflation adjusted growth coming in at 0.1% for the quarter to be up 1.1% on year ago levels. The weakest economic growth in over 30 years, excluding covid. Household consumption, residential construction, business investment, and net exports all detracted, whilst government spending once again grew at a strong pace.
Australian house prices rose by 0.8% in May across the combined capital cities, according to CoreLogic data. This was the strongest monthly lift since October 2023, with Perth, Adelaide, and Brisbane leading the charge.
New housing lending rose by a strong 4.8% in April, with the strong growth supporting the lift in house prices. Investor lending growth came in ahead of owner-occupiers, rising by 5.6%.
The Australian Fair Work Commission handed down a 3.75% increase in minimum and award wages, broadly in line with expectations. The commission cited easing inflation, zero productivity growth, and upcoming tax cuts as determining factors.
The US central bank’s preferred inflation gauge met expectations and was 2.8% higher on a year ago. Still too high for rate cuts, but important there were no upside surprises.
A key US manufacturing index contracted more sharply in May than expected. New goods orders dropped by the most in nearly two years, but a measure of input inflation fell back from the highest level since mid-2022.
US data showed job openings in the US sank in April to a more than three year low of 8.1 million. Private sector payroll data showed employment increased 152,000 in May, coming in below expectations.
The Eurozone central bank cut interest rates by 0.25%, to 3.75%, as widely expected. The move seemed like a reluctant one (ie. not a telegraph of more rates to come) given the bank revised inflation forecasts higher and with recent data on inflation and wages printing higher than expected.
Eurozone consumer prices rose by 2.6% in May on the same time last year, up from 2.4% in April and above expectations.
China’s manufacturing activity unexpectedly fell in May as their property crash continues to weigh on business, investor, and consumer confidence. In a confusing contrast, another data set showed that factory activity expanded in May to its highest level since June 2022.
Asian factory activity expanded in May as manufacturers benefited from broadening global demand, according to private surveys.
The Bank of Canada cut interest rates by 0.25% to 4.75%, making it the first G7 central bank to begin an easing cycle, whilst flagging more rate cuts to come.
Politics
According to US officials, the US will coordinate with allies to punish Chinese firms that are helping Russia bolster its military industrial base, including potential sanctions against financial institutions.
Israel has pushed back on a cease-fire plan laid out by US President Joe Biden.
Indian election results are pointing to Narendra Modi getting a third term as Prime Minister but that his party would lose its outright majority. He won crucial backing from two key allies in his coalition that will extend his decade in power. Pro-business stance continues but swiftness of policy changes going forward likely to slow somewhat.
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