• ASX Emerging Companies (XEC) index up 4.5% this week, over 11% for July 
  • Korean, US and EU markets lift, Chinese and Japanese fell
  • The RBA, and BoE meet to decide rates, US investors sweat July Non-Farm Payrolls 


The economic week that was

The ASX Emerging Companies (XEC) index gained 4.5% last week, and over 11% for July.

In Rugby League terms this is an index which has done some very hard yards through the middle (the Materials XMM and Mining XMJ both down 4.8% and 5.8% for the July respectively), before swinging it out wide and finding lots of space, (the IT sector is up almost 11%), with the junior BNPL stocks doing a fair bit of the scoring.

This 1981 pre-season “Craven Mild” cup match which St George did not lose makes it all pretty clear.

Around the grounds the European markets crept higher, the Korean KOSPI found 2.7% while Chinese and Japanese indices fell.

On Friday, the US had a near 1% slip up in second quarter GDP, but a few strong quarterly reports from several notable tech companies, like Amazon and Apple seemed to sort all that.

Wall Street made July its best month of ’22, and the S&P 500 and Dow scored their best months since November 2020.

The S&P was up 4.3% for the week and 9.1% for the month of July. The Dow was up nearly 3% for the week and 6.7% for the month.

The Nasdaq was up 4.7% for the week and the tech-heavy’s 12.3% gain was its best month since April 2020.

And as I and Eddy and some few others totally expected, the US Federal Reserve bumped interest rates higher by another 75 basis points for the second straight month.

Chairman Powell – sounding less-hawk, more-dove – noted that interest rates have now reached ‘neutral’ levels, leaving the door ajar for a slowdown in the pace of rate increases using a tone which gave the sense that future rate increases won’t be quite so forceful.

“Market participants wasted no time, with the implied probability for another 75bp move in September declining substantially in the aftermath and the terminal rate being marked down a notch,” said XM’s CEO Peter McGuire.

“This translated into a softer US dollar and a relief rally in the stock market, with the Nasdaq that is most sensitive to rate fluctuations climbing by more than 4% to record its strongest session in two years.”

Elsewhere last week, Euro-zone inflation climbed to another all-time high, supporting calls for the European Central Bank to follow up its first interest-rate hike since 2011 with another one.


The economic week that will be

The Reserve Bank of Australia and the (emotionally reserved) Bank of England will decide whether to accelerate their hiking cycles.

McGuire says it’ll be another terribly crucial week for everyone with skin in the recession risk and monetary policy game.

It’s also – yay – US Non-Farm Payrolls week.

“The ISM PMIs are bound to attract a lot of attention as well in the US as growth concerns intensify,” McGuire says.

Elsewhere, the Canucks and the Kiwi’s get some jobless data, while some oddball manufacturing PMIs out of China could move markets – a la The Beatles – here there and everywhere.

The wonderfully fractious OPEC+ have a big Zoom meet scheduled. That can always throw a spanner in (filling up) the Mercs. (A-thank you.)

The US economy really should be Officially in a Technical Recession after GDP officially shrank for two straight quarters.

But it turns out the RBA also doesn’t know what it’s talking about:

“But by its own definition, the Fed does not see a broad-based decline in economic activity as there appears to be several pockets of growth still,” Pete McGuire told Stockhead.

“Moreover, the strong jobs growth and wages pressures are ‘not consistent with a recession’ according to Chair Jerome Powell.”

JP Morgan dudes can back that up.  “Despite a second consecutive quarter of negative GDP growth… we do not believe the US slipped into a recession earlier this year, given NFP growth averaged 375,000 per month during the second quarter.”

Though, the investment bank warned that “the recent large increase in initial jobless claims … raises our level of concern about a recession taking hold.”

“We believe that a further step upward – to an average 275,000 this quarter – would be a strong signal that the US entered a recession,” JP Morgan analysts wrote in an economic brief on Friday.

And that’s why last week weren’t no recession. And why US markets last week played strong, done good.

Oh, and then there’s a fair whack of the ASX FY22 Reporting Season.


The Economic Calendar for this week


Australia and New Zealand data

Melbourne Institute Inflation gauge July y/y preview
ANZ Job Ads July

CoreLogic Dwelling Prices July
Housing Finance June
Building Approvals June
RBA Board Meeting (2:30pm)
Cash Rate Target (expected 1.85% / previous 1.35%)

Aust Retail Sales Volumes Q2
NZ Unemployment rate Q2

Aust Trade Balance June

RBA Statement on Monetary Policy

Global data

CHINA Caixin Manufacturing PMI July
EU Unemployment Rate June
US Construction Spending June
US ISM Manufacturing July

UK Nationwide House Prices July

CHINA Caixin Services PMI July
EU Retail Sales June
US Factory Orders June
US ISM Non–Manufacturing July

UK BoE Policy Meeting
US Trade Balance June

CHINA Current Account Q2 Preliminary
CHINA Trade Balance July
EU German Industrial Production June
US Non–farm Payrolls Change July/Unemployment Rate July

Source: CBA, investingdotcom, Westpac

The ASX IPO calendar for this week

According to the ASX these are no stocks making their debut listing this week…

However… Australia Sunny Glass which was due to list on 26 July has postponed and is still out there.

I feel it’s soon, so I’m just going to put it here:

Australia Sunny Glass Group (ASX:AG1)

IPO: $7.5m at $0.35

This Australian-based holding company, through its subsidiaries, operates a glass production and supply business for structural building facades.

The group has a fully automated processing plant which it says is highly efficient, accurate and scalable and an R&D focus on the development of cyclone resistant glass using new laminating and bonding techniques.