Mixed signals for equity investors

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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.

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 3^rd 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.

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

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