Episode – Page 71 – Digital Finance Analytics (DFA) Blog

Operation Ricochet! [Podcast]

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Ricochet is defined as a glancing rebound (as of a projectile off a flat surface). And in the markets, we are seeing that in spades at the moment.

So, in this week’s market review we will as normal start in the US, cross to Europe and Asia and end in Australia. But I want to stress how volatile things are, in a situation where good news is bad news, expectations of a recession or slow down are growing, and Central Banks are still generally talking interest rates higher.

Plus, as I discussed yesterday, there is a growing divergence between the RBA’s approach compared with other Central Banks, to the point where we risk higher rates for longer in a slowing economy, which is exposed not only to exchange rate risks, but also a slowing China.

The Dow gained Friday as investors mulled a mixed jobs report and speculation about China easing Covid-19 lockdown measures, but that wasn’t enough to prevent the marketfrom snapping a three-week win streak following the Fed’s rate hike this week.In fact, global shares rose on Friday and the U.S. dollar fell, after jobs data came in stronger than expected but also hinted at some slack in the tight American labor market,triggering again that hope that the Federal Reserve might ease up on monetary tightening –despite what was said just a day earlier about higher rates.

Data from the U.S. Bureau of Labor Statistics showed the economy generated 261,000 jobs in October. That was higher than an estimate of 200,000expected but it also showed unemployment rising to 3.7% from 3.5% in September while wage inflation dropped to 4.7% from 5% in the prior month.Average hourly earnings increased 0.4% after rising 0.3% in September, but the rise in wages slowed to 4.7% year-on-year in October after advancing 5.0% in September.The participation rate eased back a little to 62.2%.The stronger jobs report comes just ahead of fresh inflation data next week, which if continues to show inflation running hot would lift the prospect of another 75 basis point hike next month.

In Australia. Afterpay-owner Block led the Australian sharemarket higher on Friday after reporting a stronger-than-expected third quarter profit, causing its share price to leap 10.9 per cent to $97.03.

The S&P/ASX 200 added 0.5 per cent, or 34.6 points, to 6892.5 on Friday, lifting its weekly gain to 1.6 per cent. The broader All Ordinaries index added 0.6 per cent to 7089.3 on Friday.

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

Digital Finance Analytics (DFA) Blog

Operation Ricochet! [Podcast]

00:00 / 00:30:38

The Central Bank Rate Rise Pass The Parcel Continues… [Podcast]

The Bank of England raised interest rates by the most since 1989 on Thursday but warned investors that the risk of Britain’s longest recession in at least a century means borrowing costs are likely to rise less than they expect.

The BoE increased Bank Rate to 3% from 2.25% and warned that the British economy might not grow for another two years – the longest slump in records dating back to the 1920s – if rates were to go up by as much as markets have recently bet. The pound tumbled after the decision, while London-listed stocks fell and UK bonds came under pressure.

“We can’t make promises about future interest rates but based on where we stand today, we think Bank Rate will have to go up by less than currently priced in financial markets,” Governor Andrew Bailey said, in an unusually blunt message.

The BoE said it now expects inflation will hit a 40-year high of around 11% during the current quarter, more than five times its 2% target. But it also thinks the economy has entered a recession that could mean it contracts in both 2023 and 2024 and shrinks by 2.9% in total.

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

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

Digital Finance Analytics (DFA) Blog

The Central Bank Rate Rise Pass The Parcel Continues... [Podcast]

00:00 / 00:31:56

The RBA’s Too Slow Moves Are Extending And Embedding Inflation! [Podcast]

The RBA released their latest Statement On Monetary Policy, which contained a higher forecast inflation rate, and a lower growth forecast, out beyond 2024. Their revisions to growth are down again, while rates would have to be higher for longer.

Compared with other Central Banks, the RBA is being too timid which will mean more pressure on households and businesses for longer.

https://www.rba.gov.au/publications/smp/2022/nov/

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Digital Finance Analytics (DFA) Blog

The RBA’s Too Slow Moves Are Extending And Embedding Inflation! [Podcast]

00:00 / 00:13:40

The Rates Are Beginning To Bite: With Steve Mickenbecker [Podcast]

I discuss the fallout from the RBA rate hikes with Steve Mickenbecker from Canstar.

We look at strategies to alleviate the pain of higher rates, the risks within some approaches and the broader issues of negative equity and mortgage prisoners.

Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.

https://www.canstar.com.au/team-members/steve-mickenbecker/

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Digital Finance Analytics (DFA) Blog

The Rates Are Beginning To Bite: With Steve Mickenbecker [Podcast]

00:00 / 00:43:32

Fed Signals Higher For Longer And Markets Crater! [Podcast]

As Central Bank Rate Fest rolls on from the RBA on Tuesday, as expected the FED lifted the US interest rate target by 75 basis points overnight and reaffirmed continued hikes ahead. Later tonight we will get the Bank of England announcement, which is also expected to hike big.

The Fed’s unanimous decision lifted the target for the benchmark federal funds rate to a range of 3.75% to 4%, its highest level since 2008. “Slower for longer,” declared JP Morgan Chase & Co, chief US economist Michael Feroli in a note to clients. “The Fed opened the door to dialing down the size of the next hike but did so without easing up financial conditions.”

As a result, U.S. stocks ended sharply lower on Wednesday, with the S&P 500 suffering its worst rout on a Fed decision day since January 2021, as comments from Fed Chair Jerome Powell shattered initial optimism over a Fed policy statement that raised interest rates by 75 basis points but signaled that smaller rate hikes may be on the horizon.

The FED said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.

“It’s as if investors came to a haunted house and got candy, but once they unwrapped it, saw it was soggy broccoli,” said Max Gokhman, chief investment officer at AlphaTrAI.

The latest edition of our finance and property news digest with a distinctively Australian flavour.

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

Digital Finance Analytics (DFA) Blog

Fed Signals Higher For Longer And Markets Crater! [Podcast]

00:00 / 00:23:34

DFA Live Q&A HD Replay Household Finances, Property and Stress [Podcast]

This is an edited version of a live discussion about the current state household finances, property and financial stress, based on our updated modelling to end October 2022. Our postcode engine will be online.

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

Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay Household Finances, Property and Stress [Podcast]

00:00 / 01:50:34

APRA And The Mystery Of The Disappearing Branches! [Podcast]

AUSTRALIA’S banking regulator APRA is picking and choosing which banks it is allowing to get away with breaking the law by misreporting whether their sites offer cash service provided by a teller according to an important article in The Regional. Kudos once again to Dale Webster for highlighting this important issue.

Errors in hundreds of minor and foreign bank sites included in the Australian Prudential Regulation Authority’s points of presence data for years, even decades, have been corrected over the past 17 months after being exposed by The Regional in May 2021.

https://www.theregional.com.au/post/regulator-s-bank-data-inconsistencies-not-adding-up

https://www.theregional.com.au/post/apra-s-clean-up-of-bank-data-errors-leaves-statistics-in-chaos

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Digital Finance Analytics (DFA) Blog

APRA And The Mystery Of The Disappearing Branches! [Podcast]

00:00 / 00:11:18

Is The Tech Bloodbath Really Over?

On Friday there was a robust, broad-based rally across Wall Street as markets looked over more encouraging economic data and a sunnier earnings outlook. This despite the upcoming Federal Reserve policy meeting next week. The FOMC decision is widely expecting a unanimous vote for at least one last major rate increase, though with the Fed’s preferred price measure still showing inflation is running hot, that might make it harder for them to set up a possible downshift in its rate-hike pace for the December meeting.

That said, despite data on Thursday showed a strong rebound in U.S. gross domestic product (GDP) in the third quarter, demonstrating resilience in the world’s largest economy and oil consumer and an acceleration with inflation, strong consumer spending data, and a robust labor market, much of Wall Street is growing confident that the Fed will pause tightening once they take the funds rate to 4.50-4.75% next quarter to the point where Financial markets have now priced in an 84.5% likelihood of a fifth consecutive 75 basis point interest rate hike at the conclusion of the Fed’s Nov. 1-2 policy meeting, and a 51.4% chance the central bank will decelerate to 50 basis points in December.

In addition to the FOMC decision, traders will also closely monitor the nonfarm payroll report. The strong labor market is still expected to show job growth with 200,000 jobs created in October, down from the 263,000 created in the prior month. The unemployment rate is expected to tick higher and wage gains are expected to slow.

So all major U.S. indexes ended the session up about 2.5% or more, with the S&P and the Nasdaq notching their second straight weekly gains. The blue-chip Dow posted its fourth consecutive Friday-to-Friday advance and its biggest weekly percentage gain since May. As a result, the bulls were back, even if largely driven by hopium (remembering the bulk of economists are still seeing a US recession likely next year!)

“This has been one of the best months (so far) in the history of the Dow, suggesting the bear market likely ended,” said Ryan Detrick, chief market strategist at Carson Group. “Big monthly moves historically happen at the end of bear markets.” “This is the second Friday in a row we’ve seen aggressive buying suggesting investors are growing more comfortable holding over the weekend,” Detrick added.

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Digital Finance Analytics (DFA) Blog

Is The Tech Bloodbath Really Over?

00:00 / 00:23:05