Politics – Page 10 – Digital Finance Analytics (DFA) Blog

Markets Higher As They Hang On For Rate Cuts (Again), While Voters Vote Against Incumbency.

This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, while covering the main points in commodities and crypto along the way.

This past week has been a doozy, with US markets still clawing higher on increased rate cut expectations, as the latest employment data and adjustments posed some important questions alongside a weakening the dollar, while in the UK the incoming Labour Government won with a whopping seat majority despite voters really voting against the Tories rather than for Starmer.

In France, horse trading ahead of Sundays second pole could mean the Right do not get the prize they were expecting, while Oil was firmer across the week on fears of middle east conflicts and in Crypto, Bitcoin has dropped more than 20% from recent highs.

Wall Street stock indexes closed firmer on Friday, with the tech-heavy Nasdaq and benchmark S&P 500 hitting record highs.

All up, the Dow Jones Industrial Average rose 0.17%, to close at 39,375.87. The S&P 500 gained 0.54%, at 5,567.19 and the Nasdaq Composite advanced 0.90%, to 18,352.76. For the week, the S&P 500 gained 1.95%, the Nasdaq rose 3.5% pct, and the Dow climbed 0.66%. The Russell 2000 Small Cap index is down 0.95% for the week and the S&P500 equal weight was parallel to its 2022 high, showing the narrowness of the support for the all time highs on the S&P500.

French financial markets have come under selling pressure since President Emmanuel Macron called for a snap election last month, with concerns that a far-right win could add to worries over fiscal sustainability. But there is also nervousness about what will happen if there is no clear winner in Sunday’s second round of voting. Fresh polls showed the far-right National Rally (RN) party and its allies were still in the lead but looked to fall short of getting an outright majority.

The UK national election on Thursday propelled the Labour Party to a sweeping victory, and Labour leader Keir Starmer became the next Prime Minister. In the six-week election campaign,

The latest update indicates that Labour has won 411 seats, and the Conservatives have secured 121 seats. This gives Labour a massive majority in the House of Commons. One seat has not yet declared a winner.

Actually, though this was a vote against the Tories, while the share of the vote Labour got hardly moved, and was in fact lower than in recent elections, votes went to the right in the form of Reform, or to the Liberal Democrats, Greens and other parties – and Labour was unseated in a couple of spots as a result of this, and in the light of their stance on Gaza.

As Sky put it, A thumping majority without a thumping share of the vote’. Chief Pole analyst John Curtice said “Actually, but for the rise of the Labour Party in Scotland… we would be reporting that basically Labours vote has not changed from what it was in 2019”. Roughly one third of the votes and two thirds of seats shows the problem with the first past the post system, with turnout (which is not compulsory) below 60%. Labour is pretty centralist and conservative.

Starmer did not win because Britain was hankering for a social-democratic government. He did not win because his Albanese-style small-target strategy appealed to voters. He won merely because he wasn’t the government. Starmer won because Labour was not the Tories. Prime Minister Rishi Sunak’s government was stale, tired, divided, regicidal and largely directionless, sapped by eight years of post-Brexit chaos.

More Signals For An OZ Rate Hike Incoming?

The New Deputy Governor at the RBA said last week, that when it comes to a rate decision, they look at many different measures, apart from the recently released monthly series which showed a lift to 4% last time around in May.
So now, in May, so before any tax cuts or other Government help has hit, Australian retail sales rose by more than expected with spending largely driven by discounts in the face of elevated borrowing costs, an outcome that further strengthens the case for an interest rate hike this year.

As a result, yields on policy-sensitive two-year bonds rose to 4.289% as rates traders boosted the odds for an interest rate hike this year. Stocks pared gains, with the ASX 200 closing still in the green, at 7,739.90.

Australian retail turnover rose 0.6 per cent in May 2024, according to seasonally adjusted figures released today by the Australian Bureau of Statistics (ABS), making it the biggest increase in four months, The outcome, which was double the pace that analysts forecast, follows a 0.1% gain in April and a 0.4 per cent fall in March 2024.

We should highlight that with population growth of around 600,000 in the past year, and inflation running circa 4%, we should absolutely be expecting to see retail turnover lifting, as people pay more the things they buy, and more people buy them.

All up, to me while there is a better tone to this numbers, many consumers remain under intense pressure, while strong population growth is working its “magic” in cushioning retailers from the worst impacts and are allowing them to retain and build margin. Other data suggests more vehicle sales slowed into the financial year end. The tax cuts might well given a further boost to sales, but potentially also to inflation.

The ASX Rate tracker is now seeing a high of 4.47% in November, and back to 4.35% in June next year. The bottom line is I think markets are correct in reading this as a reinforcing sign that rates may need to go higher to snuff out inflation. But is not definitive, yet as there is more data water to go under the bridge.

http://www.martinnorth.com/

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

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From Here, Where? As Uncertainty Haunts The Markets!

This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, and we also cover commodities and crypto, as I get my ideas straight for the next leg of the year. In essence, AI has driven markets hard, especially in the US, but market breadth is narrow, and risks remain elevated.

Shares in New York ended lower on Friday, reversing modest opening gains after the latest inflation data showed that the disinflation narrative was intact, widening ever so slightly the door to a pivot to rate cuts. So an early rally fizzled as investors digested in-line inflation data and weighed political uncertainty after the U.S. presidential debate where the shaky performance from U.S. President Joe against Donald Trump has just ratcheted November’s U.S. election uncertainty up substantially.

Data showed U.S. monthly inflation was unchanged in May, an encouraging development after strong price increases earlier this year raised doubts over the effectiveness of the Fed’s monetary policy. The Commerce Department report also showed consumer spending rose marginally last month, fueling optimism that the U.S. central bank could engineer a much-desired “soft landing” for the economy.

There was a late wave of selling the magnificent seven, with a 3 per cent tumble in Meta. Amazon, Alphabet, Apple and Microsoft each closed more than 1 per cent lower though Tesla edged 0.2 per cent higher.

Wells Fargo noted that upcoming events, such as the November elections and potential delays in disinflation, may cause episodes of market volatility in the months ahead. Worth reflecting again on the fact that thirty percent of the S&P’s returns this year have come from Nvidia alone. It was now the most expensive stock on the most expensive market in the world and the Magnificent 7 accounts for 71% of the S&P 500 Index’s year-to-date return. Tightrope time?

http://www.martinnorth.com/

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

CPI: Making Sense Of The Senseless??

The ABS released the latest monthly CPI data today, and it reports that Inflation is still sticky in Australia, and accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting. The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35%.

Wednesday’s figures suggest inflation is running ahead of the RBA’s forecast for underlying inflation to ease to 3.8 per cent in the June quarter. That said, the monthly numbers are at best partial, compared with the more complete quarterly data which provides a fuller picture of inflation.

In truth, for many households real inflation is much higher than the statistics suggest, with continued massive lifts in insurance costs for example, but Warren Hogan may end up being right, with further rate hikes a clear threat if the Q2 quarterly inflation print confirms the uptrend.

This is a mess, created by taking rates too low in the first place, saying they would stay low into 2024, then not returning them to normal rates soon enough, meantime luring many into property are extended prices and big loans. The route out of the years of policy failure will be difficult for many, though somehow policy makers and politicians seem to be able to find someone else to blame. How about some real accountability?

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.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

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

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.