No Week for the Meek


The SPI Futures index has pegged the local benchmark to begin trade almost a full -1% lower at 10am in Sydney on Monday, so bring your emotional fortitude and prep for an emergency fiscal enema.

Lots of catalysts for that unwelcome start to the week…

But a new one of note is that in the New York on Friday, The Biggest Australian of All – BHP Group (NYSE:BHP) fell circa 3% – just one more addition to the witches brew that is global equities.


Via Google Finance


The Weak that Was

Wall Street’s declining indices were tormented last week following the calamity which levelled a hospital in Gaza.

That horror super-charged tensions in the Middle East upended traders’ hopes of a limited Hamas-Israel fallout, while fiercer-than-wanted economic resilience in turn sent US yields surging happily on their way beyond 5%.

It’s early days in the US September quarterlies, with only circa 17% of S&P 500 companies having reported – with 75% coming in with beats. There’s hope solid beats from mega-tech could yet bring a few bulls back into the the fray for October.

At home, the benchmark took this abysmal lead from Wall Street and ran with it anyway.

The potent local additions to the cauldron last week included  another robust labour force report and the RBA’s Bullockingly new hawkish tone revealed Tuesday, in the statement on monetary policy (SOMP). The RBA meeting minutes imply another RBA rates hike is in play again before Christmas.

That saw the ASX200 down -2.1% for the week, after some anxious selling on Thursday and Friday.

The risk-off Nasdaq copped it and so did the local the rate-sensitive IT Sector which gave away more than -5.0%. That and the equally wobbly Consumer Discretionary Sector (-3.5%) led the losses.

Only the Energy Sector ended higher over the five days and that was on the back of a big week for Whitehaven Coal (WHC) +12.4%.

“Investors, like everyone else, are becoming increasingly concerned that the Israel-Hamas conflict could spread across the region – Joe Biden must be afraid of something; otherwise, he wouldn’t have gotten out of bed to make the ~13-hour flight to Israel,” says James Gerrish from Market Matters.

“Economic data remains firm, forcing central banks to maintain their hawkish stance; the Fed & RBA might still have 1-2 hikes in them, although our view has been, and continues to be, they won’t hike again in this cycle.”

As per tradition, both gold and oil and their associated local proxies don’t mind a bit of war, especially in the Middle East.

Gold has soared, gaining circa $US50 over the last five days, while oil continued to climb, helping their respective sectors.

“As we’ve repeated over the last fortnight, we prefer gold over oil over the coming year but are currently enjoying exposure to both,” Gerrish added.

Friday saw US stocks fall into the weekend, as a surge in the 10-year Treasury yield added to broader concerns about the terrific state of the US economy.

The S&P 500 shed -1.25%. The Tech-Heavy Nasdaq Composite gave up 1.5% and the Dow Jones Industrial Average lost 0.9%.

The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, and on Friday, the Aussie 10-year bond yield clocked anew post-2011 high.

Now that the US 10-year has broken that level – everything from mortgages to credit cards, car loans and business borrowing could all lift. It’s also making equities seem a lot more like a mug’s game at those levels.

Global stock losses accelerated just as the weekend break came in to mask accelerating fears – not least that the Israel-Hamas war might just start sucking in both innocent and other bystanders.

The Fear Gauge – aka The Vix – is simmering at its most volatile measurement since early March.

For the week combined, US indices fell -2.4%. In the EU, stocks fell almost -3%. Around the ‘hood, Japanese indices fell -3.3% and Chinese shares tumbled -4.2%.

Metal prices fell and iron ore prices were flat. The Aussie dollar is unhealthy at a little above 0.63 US cents.

And China…

More signs that Chinese growth has bottomed with economic activity data stronger-than-expected. GDP slowed to 4.9%yoy in the September quarter, but this was stronger than expected with quarterly GDP growth of 1.3% QoQ, up from 0.5%.

Growth in industrial production and retail sales also surprised on the upside in September and unemployment fell.

This followed stronger-than-expected import, export and credit data.

Some policy tweaking/stimulus out of Beijing may in fact be doing some small good, although the trend in key data still remains soft (see the next chart) and property related risks remain high, with property sales and investment down and home prices continuing to fall in September. Policy stimulus announcements have stopped short of what may still ultimately be required.

Barclay’s Bank said in a Friday note China’s stronger-than-expected official Q3 GDP data implies this year’s ~5% growth target is within reach.

“However, we see signs of moderation in sequential momentum, with softer MoM growth in IP and retail sales. We note some discrepancies in official data that may not be fully capturing underlying developments in the economy.”


The Week In Front of Us

In the United States of America, we’ll got a look at the September quarter GDP, the PCE Price index, and both personal income and spending.

Other useful inflation indicators are up for US durable goods orders as well as a bunch of PMI readings from our mates at S&P Global.

For a successful Goldilocks Zone week of trade, there’ll be both walking on eggshells as the data above tries to thread a very exact needle: Both nothing calamitous, but nothing robust either, please.

We could all probably spend some more time worrying about the state of the US housing market which has a recent history of destroying everything and this week might be a good opportunity, through new measures of spending and on new home sales.

US economists have been saying that it looks clear 2023 will be the slowest year of home sales since the housing bubble burst in 2008, as per Ryan Gosling in that movie. So good.

This week, we’ve got lots of internationally feared ridiculed and misunderstood central bank rate decisions – announcements are due fom the ECB, Bank of Canada, and Turkey’s quietly off-the-hook TCMB.

Lots and lots of Flash (services and manufacturing) PMIs will be released here, in Japan, La France, Ze Germany, and the the Euro Area they control but for the runners over on the British Isles and their ill-named United Kingdom.

Aussie Economics

At home, the terrifying new RBA Governor Michele Bullock delivers her first official speech as Terrifying Governor at a big Commbank thing (… a Global Markets conference on Tuesday night), which is timely because Aussie Q3 consumer price inflation (CPI) drops on Wednesday.

The governor will next make an appearance before a terrified Senate Economics Committee on Friday.

But both sightings are likely to instil the unsuspecting public that this new Dr Lowe-less RBA has a “low tolerance” for higher-than-expected inflation.

As the CommBank’s head of Australian economics Gareth Aird said last week, after taking the monetary policy out of the bank’s statement:

‘The key take away from the (SOMP) release was that “the Board has a low tolerance for a slower return of inflation to target than currently expected”.’

Prior to the release, Aird’s team of Allen, Ottley, Wu, Clifton, Dhar et al* noted the November meeting was “live” given the significance of this week’s loaded Q3 CPI release and in the context of recent data, “that has highlighted resilience in the Australian economy.”

So, economists polled by Reuters reckon September quarter CPI from the ABS should show an increase of 1.1% QoQ, bringing annual inflation down to 5.3%, a marked improvement – if true – from the ungodly 6% of a truly heathen June quarter.

* I thought I’d just add the bank’s current team roster. I’ve been doing this a while and it’s pretty good lookin’ team …and that’s not including CommSec’s Craig James, Ryan Felsman, Steven Daghlian… et al.
  • Gareth Aird, Head of Australian Economics
  • Belinda Allen, Senior Economist
  • Stephen Wu, Economist
  • Harry Ottley, Economist
  • Joseph Capurso, Head of International and Sustainable Economics
  • Kristina Clifton, Senior Economist and Senior Currency Strategist
  • Vivek Dhar, Mining & Energy Commodities
  • Carol Kong, Economist and Currency Strategist
  • John Oh, Sustainable Economist
  • Stephen Halmarick, Chief Economist, Head of Global Economic & Markets Research
Screenshot CBA

Headline inflation has ‘eased substantially’ since reaching a peak of 7.8%/yr in December quarter 2022.

Dr Shane Oliver, chief economist and head of investment at AMP, reckons Q3 CPI will feature a standoff between a circa 7% bump in fuel prices, higher rents, fatter utility bills, more extortionist insurance costs Vs. the intro of the new childcare subsidy, and some apparently ‘softer goods prices’ (although this little Marrickvillian has seen no such softness at the mall. Certainly the homemade beef jerky indicator from Metro Master Meats, suggests ongoing price pressures.)

“Underlying inflation as measured by the trimmed mean is expected to be 1.1%qoq or 5%yoy, down from 5.9%… Our expectations are roughly in line with RBA forecasts and so should be consistent with it leaving interest rates on hold, but the risk is on the upside particularly for the trimmed mean,” Dr Oliver says.

What your fraught reporter can confirm is CBA’s prediction for alcohol and tobacco prices to have risen by 1.3%/qtr appear right on what’s left of the money – supported by sharp increases in the gov’s pain-numbing excise.

After a few months in France, the September +5% tax on tobacco feels particularly unhinged – though I’m sure the great sweaty majority of you are righteously supportive that the weakest-minded among us will continue to enjoy an annual rolling +5% increase in cigs over the next three years.

Didn’t have any problem saying ‘yes’ to that one.

And don’t get me started on what it’s like filling up the Vovlo 240 in Sydenham right now.

Aussie fuel prices jumped – I mean absolutely leapt –  circa 9.1% MoM higher in August and punters expect a further 2.2% increase through September.

Although, one can never get too angry when safety is the priority

Bad parenting by the duck, but clearly a very safe car. Via Volvo


Meantime, in other Aussie data out this week… we get S&P ‘business condition’ PMIs (Tuesday) also thought to have ‘softened a bit’ (Oliver), while September qtr producer price inflation (PPI) drops on Friday …pre-or-post the new RBA Governator’s schooling of the senate committee.

The Australian Economic Calendar

Monday October 23 – Friday October – 27

Source: Commsec, Trading Economics, S&P Global Research, AMP 


Australia Judo Bank Flash PMI, Manufacturing & Services

RBA-speak (Bullock)
Australia Inflation (CPI Q3)

Australia Import and Export Prices (Q3)

Australia PPI (Q3)
RBA-speak (Bullock)


The Everyone Else Economic Calendar

Monday October 23 – Friday October – 27

New Zealand, Hong Kong SAR and Thailand Market Holidays
Singapore CPI (Sep)
Taiwan Industrial Production (Sep)
Taiwan Retail Sales (Sep)
Taiwan Unemployment Rate (Sep)
Eurozone Consumer Confidence (Oct)

India Market Holiday
Japan au Jibun Bank Flash Manufacturing PMI
UK S&P Global/CIPS Flash PMI, Manufacturing & Services
Germany HCOB Flash PMI, Manufacturing & Services
France HCOB Flash PMI, Manufacturing & Services
Eurozone HCOB Flash PMI, Manufacturing & Services
US S&P Global Flash PMI, Manufacturing & Services
South Korea PPI (Sep)
Germany GfK Consumer Confidence (Nov)
United Kingdom Labour Market Report (Aug)

South Korea Consumer Confidence (Oct)
Germany Ifo Business Climate (Oct)
Canada BoC Interest Rate Decision
United States New Home Sales (Sep)
United States Building Permits (Sep, final)

South Korea Business Confidence (Oct)
South Korea GDP (Q3)
Thailand Trade (Sep)
Malaysia PPI (Sep)
Singapore Industrial Production (Sep)
Hong Kong SAR Trade (Sep)
Turkey TCMB Interest Rate Decision
Eurozone ECB Interest Rate Decision
United States Durable Goods Orders (Sep)
United States GDP (Q3, advance)
United States Wholesale Inventories (Sep)
United States Pending Home Sales (Sep)

China (Mainland) Industrial Profits (Sep)
Singapore Unemployment (Q3, prelim)
Taiwan Consumer Confidence (Oct)
France GDP (Q3, prelim)
France Inflation (Oct, prelim)
Spain GDP (Q3, flash)
Italy Business Confidence (Oct)
United States Core PCE Price Index (Sep)
United States Personal Income and Spending (Sep)
United States UoM Sentiment (Oct, final)


US Q3 Earnings


This week it’s all about who it’s always about – the mega-cap magnificence of  Alphabet, Amazon, Meta Platforms and Microsoft.

Investors will assess how businesses are positioning for the possibility of a higher-for-longer interest rate environment.

Disappointing results for the megacaps in particular could bode trouble not only for their respective stocks, but also for a broader market that has relied on their outperformance for its gains this year. While the S&P 500 is higher by 10% in 2023, the equal-weighted index is down slightly.

Josh Gilbert at eToro told Stockhead this week is set to be one of the biggest on an already very big US quarterly earnings calendar – it’s a mega-tech fest again with Messrs Microsoft, Alphabet (Google’s mum) and Meta all posting results.

“Importantly, tech earnings need to deliver,” Josh says.” Valuations are high and the expectation from investors will be that earnings are recovering and margins are improving for the tech world’s heaviest hitters.”

A big focus for both Microsoft and Google will be artificial intelligence.

“Amid growing pressure on those in the AI field to turn presence into profit, investors will want to hear from management that AI hype can translate into growing revenue and earnings. Despite AI effectively being the trend of 2023, big tech is still struggling to convert market enthusiasm and broad adoption into viable revenue streams.”

Meta will also be in the AI conversation with its launch of its whacky AI assistant glasses, so outlook there will be key as well, says Josh.

“Of course, Meta’s foray into virtual and augmented reality with Horizon Worlds has largely fallen far short of expectations, so the pressure is on for Zuckerberg to produce a ‘must have’ piece of hardware this financial year. Time will tell whether AI is the key to reversing some of the negative consumer sentiment the company endured across 2023. Margin improvement has been key for Meta since cutting costs early, which has helped shares surge by 200% YTD, so further margin growth will be in the limelight.”


TUESDAY – Alphabet, Microsoft, F5, Visa, Texas Instruments, General Electric, NextEra Energy, Raytheon Technologies, Sherwin-Williams, Dow, Inc., General Motors, 3M, PulteGroup, Halliburton, Coca-Cola, Kimberly-Clark, Corning

WEDNESDAY – Hilton Worldwide, General Dynamics, T-Mobile US, Boeing, Hess, Meta Platforms, Align Technology, Whirlpools, International Business Machines

THURSDAY – Honeywell International,Northrop Grumman, PG&E, Mastercard, Amazon, Royal Caribbean Group, Hasbro, Southwest Airlines, Comcast, Hershey, Intel, L3Harris Technologies, Ford Motors, Chipotle Mexican Grill

FRIDAY – Phillips, Chevron, Stanley Black & Decker, Exxon Mobil, Colgate-Palmolive, T. Rowe Price Group