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Month: April 2022

Mixed signals for equity investors

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Equity markets were mixed this week with US companies reporting strong results whilst the US central bank readied the market for a large rate rise next month.  

So far, about 80% of the largest 500 US companies that have posted earnings results for the March quarter have beaten analyst expectations.  

In local stock news, Bank of Queensland’s share price fell as the company reported a decrease in its net interest margin amid ongoing competitive pressures and higher fixed rate lending volumes.  

Telecoms firm Uniti Group has agreed to a $3.62 billion takeover offer from a consortium of Canada’s Brookfield Asset Management and fund manager Morrison & Co.  

Shares in Ramsay Health Care rose more than 20% after it revealed a $20 billion, $88 per share, bid by a consortium led by private equity giant KKR. The offer represents a premium of more than 36% from Ramsay’s close the day before the announcement. Super fund Hesta are part of the consortium.  

Rio Tinto’s quarterly iron ore exports dropped 8% compared with the same period last year.   BHP shares fell after the miner said its operations were hampered by labour shortages (covid policy related) along with bouts of bad weather. Production at its flagship Pilbara ore operations slipped in the March quarter.  

AGL Energy revealed its Loy Yang coal-fired power station had suffered an electrical fault, wiping 25% of its generation capacity potentially until August.
Economic
Australia’s unemployment rate remained at 4% but contrasting surveys/data paint a slightly different picture. Roy Morgan findings show that 2.3 million Australians (16.2% of the workforce) remain either unemployed or under-employed. However, ABS estimates show that number is closer 1.5 million people.  

Annual growth in new Australian housing lending continued to slow in March. Renovation activity remained very strong, with lending at record high levels. There was a solid lift in consumer lending due to holiday financing.  

The US central bank chairman signalled that they were likely to raise interest rates by 0.50% at its meeting next month.  

The World Bank hasn’t ruled out further downgrades to their global economic growth outlook. The institution previously lowered its estimate for global growth in 2022 to 3.2% from 4.1% in January.

The IMF has also slashed its global growth forecast to 3.6% in 2022, down from a forecast of 4.4% in January.  

The European central bank retained their interest rate at emergency settings but judged that incoming data since its last meeting has reinforced the expectation that money printing under its asset purchase program should be concluded in the 3rd quarter.  

China announced that authorities would cut banks’ reserve requirements soon to support the lockdown battered economy. This would allow (or encourage) the banks to lend more freely. 
Politics
A snap poll showed Australian opposition leader Anthony Albanese had the edge in the first debate of a tightly fought election campaign against PM Scott Morrison. This pushed betting odds, historical a pretty good indicator, back in favour of the Labor leader following a period of odds significantly shortening for the current PM.  

Some of Germany’s industrial giants have warned that imposing an embargo on Russian gas to punish Moscow would cause the national economy irreversible damage. The EU has warned member states that meeting Russia’s demand to pay for Russian gas in Rubles would violate sanctions. In contrast, India is becoming a large buyer of oil from Russia and in some cases selling refined fuel on to Europe. When there’s a will there’s a way.  

Chinese President Xi sees no alternative to a Covid-zero approach despite simmering anger in the locked-down financial hub of Shanghai and mounting costs. Xi is seeking a third 5-year term during a congress later this year. 

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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US releases more oil

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

MARKETS
The local equity market finished higher for the week whilst global markets were mixed
with emerging market equities receiving a boost.


Parts of the US government bond yield curve are inverting, ie. where short term bond
yields are higher than long term bond yields, usually a key indicator of an economic
downturn or recession. Shorter term bond yields are trying to reflect inflationary concerns
whilst longer term bond yields are reflecting that the economy isn’t robust enough for the
central bank to fight inflation with significant rate rises.


In local stock news, the Star Entertainment CEO has resigned following revelations of
failings to prevent criminals exploiting its casinos.


CIMIC has recommended shareholders accept a takeover offer as its largest shareholder
Hochtief has gained 85% of the company through an off-market bid for $22 per share.
Private equity group Blackstone received approval from the Foreign Investment Review
Board to buy casino operator Crown. Blackstone still needs to clear other hurdles in order
to complete their $8.9 billion offer.


Telstra’s current CFO Vicki Brady was named the incoming CEO after current CEO Andy
Penn said he will be retiring in September. Brady says the carrier can be a growth company
again.


Air New Zealand shares resumed trading after revealing a more than $2 billion
recapitalisation plan to save the company. The package includes selling a large amount of
new shares to investors and the government and a loan from the government.


US crude oil supplies dropped again last week putting additional upward pressure on the
oil price thus forcing the US President Biden to release more oil from their strategic
reserves, whilst the OPEC+ oil producing nations stuck to its existing deal raising the
production target by 432,000 barrels per day. The oil price finished the week lower.

ECONOMICS
The Federal Government handed down their budget with little surprises with measures
unlikely to significantly alter the economic trajectory or have any significant investment
market impacts. The key initiative announced was a “cost of living” support package to help
offset the costs of rising fuel prices and broader inflationary pressures.


The Government expects 3.5% economic growth this year before settling back to 2.5%
next year. They expect headline inflation of 4.25% this year before settling back down at 3%
and 2.75% in the years to follow. Unemployment is forecast at 3.75% and is expected to
remain low.


Australian retail trade rose by 1.8% in February and is now 9.1% stronger over the year.
Strong spending on cafes, restaurants & takeaway, clothing & footwear, as well as
department stores drove the result. NSW and SA saw the strongest growth in the month.
Australian job vacancies rose by 6.9% over the 3 months to February to be 200,000 higher
than pre-pandemic levels. Job vacancies now total 423,500, a record high, in contrast to the
563,300 people unemployed.


Building approvals rebounded by a strong 43.5% in February after a virus wave impacted
the January figure. The rebound was broad across both houses and apartments with gains
made across most of the country.


Total private sector credit rose by 0.6% in February, the same pace as January but lower
than the gains in November and December. Housing credit growth slowed, whilst personal
and business credit growth jumped compared to January.


US consumer confidence for March was below economist expectations according to a key
survey. The reading has been slipping in recent months as consumers have become more
pessimistic on the economic outlook.


The US Labor Department reported 11.3 million job openings in February, down slightly
from January and December’s record. Other data showed that the private sector added
450,000 jobs in March, slightly ahead of economist forecasts.


The Japanese central bank is conducting additional government bond buying to put
downward pressure on yields as 10-year bond yields rose to their highest level since
January 2016.


POLITICS
Shanghai has locked down half of the city in turns in order to prevent their most recent
virus outbreak from getting out of control. Residents barred from leaving their homes,
public transport suspended, and private cars will not be allowed on roads unless necessary.
This will have a large impact on already weak economic growth.


China’s regulatory crackdowns last year reduce the private sector’s share of the country’s
big businesses for the first time in 7 years. The government’s tough regulations fuelled a
market selloff that erased some US$1.5 trillion from Chinese stocks at the peak.


The Biden administration has commenced their plan to release roughly 1 million barrels of
oil a day from US strategic reserves for up to 6 months to combat rising petrol prices and
supply shortages. The plan will assist but releasing strategic reserves should always be
considered a very last resort. The plan will see almost one-third of their reserves drawn
down.


Germany, which relies on Russia for more than 50% of its natural gas, has triggered the
first stage of an emergency plan to brace for a potential cut-off. The third stage would
mean gas rationing.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Macarthur Wealth Management Links

Blog  https://www.macarthurwealth.com.au/insights/

Facebook  https://www.facebook.com/macarthurwealthmanagement

Youtube   https://www.youtube.com/channel/UCHde08SRVuDPchprbz0CE_g

Twitter  https://twitter.com/MacarthurWealth

Pinterest   https://www.pinterest.com.au/MacarthurWealth/

Linkedin   https://www.linkedin.com/company/macarthur-wealth-management

Instagram  https://www.instagram.com/macarthur_wealth/

Retirement: https://www.macarthurwealth.com.au/account-based-pension/

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