18-10-2022
It was a rollercoaster week for global equities, led by a raft of key US economic data releases in the lead up to the US Federal Reserve’s November meeting.
The key number that came out of the week was higher than expected US inflation September data, coming in at 8.2%. Instead of a market sell-off due to the impact of persistently high inflation on the US Fed rate hike cycle, US equities leapt. The Dow was up 2.8%, the S&P500 2.6%, and the Nasdaq 2.2%.
In Australia
The ASX200 ended the week down 0.86%, with the financial sector and gold mining stocks outperforming the market. The latest Australian consumer and business confidence data fell 0.9%, continuing the contraction in sentiment.
On the periphery, the IMF’s World Economic Outlook downgraded Australia’s economic growth rate for 2023 to 1.9% from 2.5% in April. The 2023 global forecast is at 2.7%, with the US at 1% and Euro area at 0.5%. China and India are expected to be the core drivers of global economic growth next year, with estimates at 4.4% and 6.1% respectively.
In the UK
The Bank of England (BoE) had a busy week, buying bonds (known as gilts in the UK) as part of an emergency operation to re-adjust plummeting bond prices. This is one in a string of events in response to the UK PM Liz Truss’ ‘minibudget’, which proposed billions of unfunded tax cuts, which would have forced the BoE to aggressively accelerate the interest rate hike cycle. The tax cuts have now been partially reversed.
In other news, lithium prices have continued to soar, with the price in China currently up 86 % YTD due to local government incentives and domestic supply side issues.
The Week Ahead:
Investors will be keenly watching the October RBA meeting minutes release, providing insights into the board’s expectation of the cash rate by the end of 2022 and its expected peak in 2023.
Australian Federal Budget pre-announcements also expected to continue before full release on October 25th.
Key data releases this week:
- Chinese economic output data
- UK inflation Sept
- AUS Sept labour market data
- Notable Earnings Results to watch this week: Netflix, Tesla, IBM, J&J
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