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Aussie dollar pushes higher on risk-on sentiment

Markets:

  • Local and global equity markets rose this week as equity investors ignored the threat of higher interest rates and instead focused on US central bank comments regarding the strength of the economy.
  • In local stock news, casino operator Star has been embroiled in scandal after revelations that the business disguised $900 million in transactions as hotel expenses to help guests dodge controls over using the money for gambling, putting their casino licence at risk.
  • Ramsay Health Care has received an offer from its Asian joint venture partner to buy the remainder of the shares, offering $1.82 billion.
  • Respiratory care provider Fisher & Paykel forecast full year revenue to be less than the previous one. The company said the omicron variant was requiring less respiratory intervention and a mild flu season had unfolded in the northern hemisphere.
  • National Australia Bank will follow its $2.5 billion on-market buyback with another of the same value as the bank seeks to improve its capital ratio and reduce shares.
  • JB Hi-Fi reported that 3rd quarter sales were well ahead of the same period last year, with sales up 11% in their JB Hi-Fi Australian division and up 5% in The Good Guys business.
  • The oil price rose again this week as US stockpiles dropped sharply last week and supply shortages continue given sanctions on Russia.
  • The Aussie dollar rose past the US75c mark this week, supported by high commodity prices and a positive change investor risk appetite which generally supports the Aussie. Less support for the Euro and the Yen is also resulting in additional support for the Aussie dollar.

Economics:

  • CBA data is showing that growth in new lending for housing continues to ease, primarily driven by lending to owner occupiers. Higher fixed rates have seen a declining share of new fixed rates lending and shorter fixed rate terms. Consumer lending growth picked up, but business lending growth has slowed.
  • Data showed Australian manufacturing conditions strengthening in March, marking the 22nd successive month of improvement. New orders growth accelerated with employment levels and purchasing activity continuing to rise. However, input costs and output prices rose at faster rates due to shortages and rising costs.
  • The US central bank chair said the bank must move quickly to bring too high inflation under control and if needed will use bigger than usual interest rate hikes to do so. Talk and action are two different things but talking can bring about less action if they are successful at talking down demand.
  • A key US economic leading index rose by 0.3% in February, in line with expectations, but the print does not reflect the full impact of the Russia/Ukraine conflict which escalated thereafter.
  • US existing home sales fell 7.2% in February while February sales fell 2.4% from a year earlier. Higher mortgage rates hitting home, with the average 30-year fixed mortgage recently topping 4% for the first time since 2019.
  • The Bank of England hiked rates for a 3rd successive meeting with official sounding less confident on the path for rates ahead.
  • The Bank of Japan doubled down on its commitment to keep stimulating the economy even if inflation continues to accelerate.

Politics:

  • The lack of progress in talks to amend the Brexit agreement on North Ireland has frustrated the UK which now appears to be stepping up preparations to suspend parts of the deal it struck with the European Union.

  • European Union leaders may hold off on endorsing intervention in the bloc’s wholesale energy market as member states are divided on the most effective emergency options to curb soaring power and gas prices. All options are on the table, but most aren’t easy or immediate solutions.

  • The Biden administration and European Union are close to a deal aimed at slashing Europe’s dependence on Russian energy sources, as the US and its allies seek to further isolate and punish Moscow. The deal would ensure supplies of American natural gas and hydrogen for Europe.

  • Australia, the world’s biggest export of alumina, announced a ban on shipments to Russia in a move that will add further pressure on Russia with Australia accounting for nearly 20% of Russia’s supply of alumina, a key ingredient for producing aluminium.

  • On the trade front, the Biden administration plans to reinstate exemptions from the Trump-era tariffs on 352 Chinese products that were previously granted waivers, most of which expired by the end of 2020. Elsewhere, the US and UK reached a deal to ease tariffs on British steel and aluminium, resolving a longstanding dispute.

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CB Wealth Australian Pty Ltd T/As HH Wealth is a Corporate Authorised Representative (No. 1283595) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339 384. Chris Holme is an Authorised Representative (No. 1004793) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339384.

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