US Stocks shine, ASX posts modest rise and all eyes on Central Banks - Raiz Invest

01-11-2022

It was a bullish end to the week with the ASX200 finishing +1.6%, Dow Jones +5.72%, S&P500 +3.95% and the Nasdaq Composite +2.2%.

 

In Australia

• Treasurer Dr Chalmers delivered a ‘restrained’ federal budget on Tuesday night, with the fiscal position delivering better than expected GDP and export revenues. However, Australia’s fiscal position is set to worsen in future budgets, with GDP growth forecasted to slow as the RBA tackles ongoing inflationary pressures.
• Budget Measures to combat inflation and cost of living include:
  • $20b to improve Australia’s energy grid connectivity to renewable sources
  • $4.7b to improve childcare accessibility alongside increases to paid parental leave
  • Addressing National Housing Affordability by funding social housing, assisting new homebuyers and incentivising Super funds to invest in property development. See (link to RHO blog)
  • Expansion of Commonwealth supported places for tertiary education
  • Increase to PBS co-payments
• Australian inflation data for Q3 came in at 7.3%, hotter than the expected 7%, which failed to rattle equity markets ahead of the RBA’s November decision. Key price rises were housing construction (10.5%), transport (9.2%) and food, which had the highest rise since 1983 at 9%.

 

The US

• It was a mixed week for earnings results. The key performers were Apple (despite weaker iPhone sales) and energy giants Exxon and Chevron smashing expectations.
• The poorest performers were Facebook’s parent company Meta, which dove 22%, and Amazon, down 14%, both on weak earnings and outlook. Alphabet and Microsoft also reported below expectations, but to a lesser extent.
• Also in the US, Elon Musk completed his USD$44 billion Twitter takeover.

 

Elsewhere

• Xi Jinping secured a third term as President with the Chinese Communist Party and a new Standing Committee, resulting in a major sell-off in Hong Kong and Nasdaq-traded Chinese stocks.
• Chinese manufacturing PMI fell well below market forecasts for October as the zero Covid policy in China continues to impact their economic expansion. This has a knock-on effect for Australian commodity exporters and GDP.
• Rishi Sunak was sworn in as the UK’s Prime Minister after the demise in confidence of Liz Truss to lead the Conservative Party. Sunak has a substantial task ahead of restoring economic discipline and combating cost of living issues. He’s the first British Asian Prime Minister and has a personal wealth of $1.3 billion.

 

Commodities

The International Energy Agency (IEA) produced their World Outlook for 2022. Highlights include:

• The Russia/Ukraine conflict could accelerate the transition to more secure and sustainable energy, noting that major clean energy investment is required to do so.
• Hydrogen demand is projected to increase 30x by 2030.
• The IEA expect demand to peak for coal in 3-4 years, gas by the end of the 20’s, and oil mid 30’s.
• Access to electricity is declining for first time in a decade.

 

This week

• The US Federal Reserve are widely anticipated to raise rates by 75 bps. Wall Street’s reaction will be predominantly on the nature of Fed Chair Powell’s statement.
• The RBA is set to raise the cash rate 25bps to 2.85%, with some economists predicting a 50bps rise following last week’s hot inflation data.
• The Bank of England is forecast to raise their rate by 75bps, with bond buying intervention and the repeal of Liz Truss’ budget cooling previous expectations of 100bps rise.

 

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