Martin North – Page 51 – Digital Finance Analytics (DFA) Blog

Some More CPI Numberwanging Says Rates May Have Peaked (For Now)

The Consumer Price Index (CPI) rose 0.8 per cent in the June 2023 quarter and 6.0 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).

CPI inflation slowed in the June quarter, with the quarterly rise being the lowest since September 2021. While prices continued to rise for most goods and services, there were some offsetting price falls this quarter including for domestic holiday travel and accommodation and automotive fuel.

This means Australia’s inflation rate eased more than expected in the three months through June, reflecting global trends and bolstering the case for the Reserve Bank to pause again at next week’s policy meeting.

The result was the second consecutive decline in the pace and the RBA currently expects inflation will return to the top of its 2-3% target by mid-2025.

The easing in prices will be welcomed by Governor Philip Lowe, who has put the central bank in data-dependent mode after raising interest rates 12 times over the past 15 months. Expectations that the result will allow the RBA to stand pat on Tuesday saw the Australian dollar extend losses and the yield on policy-sensitive three-year bonds fall, while stocks rose.

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Toppy Markets Remain Edgy On Better Than Expected Results, For Now…

Wall Street closed out another week with a quiet Friday on US markers as stocks found some stability after sliding the day before.

The S&P 500 edged up by less than 0.1 per cent, to 4,536.34 to cap its eighth winning week in the last 10. The Dow Jones Industrial Average added less than 0.1 per cent, to 35,227.69.

The blue-chip index was lifted by gains of more than 1% each in Procter & Gamble (NYSE:PG) and Chevron (NYSE:CVX) . It is now up over 6% in 2023, compared to the S&P 500’s 18% rise.

To be sure, the 18.1 per cent jump for the S&P 500 this year also has critics saying the rally has come too far, too fast. The risk of recession remains because inflation and interest rates remain high.

In Australia, The RBA does not expect inflation to return to the upper end of its 2 per cent to 3 per cent target band until mid-2025.

ASX company profits are on track to contract in the 2024 financial year for the first time since the pandemic, casting a dim light on the forthcoming earnings season which investors and strategists warn will translate to weaker returns for shares. Soaring wage bills, the rising cost of borrowing, and high energy costs are eroding profit margins and offsetting the bullish performance of Australia’s jobs market and robust house price growth.

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The Number-Wangers Are At It Again!

Australian employment surpassed expectations in June and the jobless rate held at a lower revised rate, underlining the labor market’s resilience to rapid interest-rate increases.

The jobless rate remained at 3.5%, having hovered in a range of 3.4%-3.7% since June last year, Australian Bureau of Statistics data showed Thursday. The economy added 32,600 roles from a month prior, more than double estimates, and employment has now risen in nine out of the past 12 months.

The data increases pressure on the Reserve Bank to resume raising rates, with money market bets implying a better-than 50% chance of a hike to 4.35% at its Aug. 1 meeting. The Australian dollar extended earlier gains, rising to 68.25 US cents. Three-year bond yields jumped 12 basis points, heading for their largest one-day increase since July 7.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

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Buying property, is both challenging and adversarial. The vendor has a professional on their side.

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Gotcha! More Big Bank BS…

In evidence given in Parliament this week we had confirmation that at least NAB, one of Australia’s big four banks, is using partial interaction statistics to falsely justify their programme of Regional Branch closures. This is the data which is parroted by the Banking Association spokesperson to justify the unjustifiable.

In the light of this, Dale Webster, The Regional Journalist, and I (remember we got the Inquiry up in the first place!) have written to the Senate Inquiry on closures today asking for an audit of all statistics being used by the banks to justify their closure plans.

Worth also reflecting on CBA’s conditional 3 year freeze on closures, and Westpac’s pull back.

Once again, we shine a spotlight on disgraceful behaviour as banks continue to suck the life blood from so many regional towns in the interests of shareholder returns. This must change!

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Has The Inflation Hurricane Abated?

In another volatile week, the markets latest winning week closed with a mixed finish on Friday following stronger profit reports than expected from several big US companies and more benign inflation news from the US this week.

Hopes for an easier Fed also helped stocks worldwide to strengthen, though markets abroad were also mixed on Friday. The MSCI World Equity index was little changed, staying at its peak for the year and its highest level since early 2022.

For the week, the Dow was up 2.3%, the S&P 500 rose 2.4% and the Nasdaq advanced 3.3%. The S&P 500 remains up 17% for the year to date.

Data showed on Wednesday U.S. consumer prices growing at their slowest pace in more than two years, and on Thursday the smallest increase in U.S. producer inflation in nearly three years. On Friday, the government reported that U.S. import prices dropped 0.2% last month, and U.S. consumer sentiment jumped to the highest level in nearly two years.

The US earnings reporting season is just getting underway, and Wall Street’s expectations are low. Analysts are forecasting the worst drop in earnings per share for S&P 500 companies since the spring of 2020. If they’re right, it would also mark a third straight quarter where profits sank.

Such expectations are key for financial markets, because one of the biggest factors that set a stock’s price is how much profit a company produces.

And a preliminary reading on a University of Michigan survey showed consumer sentiment at its highest level since September 2021, though lower-income consumers weren’t feeling as positive.

The big recent gains for stocks on Wall Street have some critics cautioning investors not to get carried away by hopes for what’s called a “soft landing,” where high inflation can be vanquished without a painful recession.

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