August Market Update
Finance Article of The Week
Murky waters ahead - Author: Luke Lyon (04/08/2024)
After reaching all-time highs on Wednesday and Thursday, the ASX plummeted Friday having its worst day in over a year. Positive inflation data propped the market up Wednesday, notably JB Hi-Fi and Harvey Norman increasing 4.3% and 5.3% respectively as consumer discretionary stocks responded well to the data. Friday saw Intel shares in the US fall 26% in a single session after announcing plans to cut 15,000 jobs after significantly weaker than expected growth and reporting a loss of 3 cents per share. This report did not come at a good time for Intel as recession fears kicked up, with the big 3 US indices falling in tandem. The Australian market responded accordingly, with all sectors finishing in the red with consumer discretionary at the forefront as the sector lost 3%, reverting most of the week’s gains.
Macroeconomic Article of The Week
RBA Faces Interest Rate Uncertainty Amid Sluggish Inflation Drop - Author: Alex Blyth (04/08/2024)
The RBA was expected to increase interest rates at the August 5th meeting, with markets pricing in a one-in-five chance of a rate rise. However, new data has shown that underlying inflation fell by 0.1% from March to June to 3.9%. Thus, economists are believing an interest rate cut will be next, but it may not be until May or August next year. An interest rate rise was expected as the RBA has been unable to successfully curb inflation over the last 12 months shown by minimal disinflation in 2024 prior to the June decrease. Judo Bank Chief Economic Advisor Warren Hogan believes a rate increase is more likely than a cut, as inflation has shown little indication of movement towards the 2- 3% target range.
Macroeconomic Article of The Week
ASX 200 Plunges 6% on Recession Fears, Recovers Slightly by Week's End - Author: Alex Blyth (11/08/2024)
The week began on Monday with the worst sell-off in four years, the ASX 200 falling by 3.7% at open on Monday and reaching nearly 6% by the end of Tuesday, with every sector in the red. The sell-off was caused due to recession fears in the US market, with the US unemployment rate rising to 4.3% the highest level since October 2021. The rise triggered the Sahm Rule, where the three-month unemployment average jumps more than half a percentage point in a year. The market rallied by 1.3% on Friday, with Life360 and NewsCorp lifting the ASX. Life360 rose more than 18% due to upgraded full-year revenue guidance and expansion plans and NewsCorp rising 7.6% with the news that it plans to sell off Foxtel. The market ended down 2% on the week.
Stock of the Week
Amazon.com (NASDAQ: AMZN) - Author: Alex Blyth (11/08/2024)
Amazon (AMZN) is the stock of the week, sitting at a $33 USD discount as of the last month. Amazon is up 21.1% over the last year compared to its current discounted price of $166.94, however the stock was priced at close to $200 at the beginning of July. The drop in performance is attributed to a bearish market position as well as Amazon missing earnings on the August 1st release. Wall Street and the US markets are fearing that a US recession may be around the corner, which has resulted in the ASX falling nearly 6% at the start of last week. Thus, investors have oversold some companies, with the share price of US tech stocks that missed earnings tumbling.
Macroeconomic Article of The Week
RBA Steady, Japan Shocks Markets - Author: Luke Lyon (11/08/2024)
The RBA this week decided to hold rates at 4.35% despite June’s trimmed inflation falling 0.1%. The RBA also said not to expect rate cuts anytime soon, as the central bank expects inflation not to return its target range of 2-3% until late 2026. Looking overseas, Japan increased rates above negative for the first time since going below zero back in 2016, causing market turmoil as investors scrambled to close their yen carry trades. Investors bought what was essentially free money at the time, converted it to a different currency and invested that expecting a higher return. However, as the yen recovered 13% since rates increased, the cost of repaying that debt has surged respectively, forcing investors to exit their positions.
Australian Market Update
Market Rallies Amid Mounting Pressures - Author: Luke Lyon (18/08/2024)
The market finished up 2.5% this week, finishing every day in the green as rebounds on wall street sent the market higher. The ASIC is suing the ASX this week after claiming it misled market participants on its upgrades to the CHESS system that was ‘on track’ to be implemented over a year ago – calling it a ‘collective failure. Unemployment increased by 0.1% to 4.2% overall as the ABS reported on Thursday, adding 58,000 people found work last month – much higher than expectations of around 20,000. Though don’t expect any rate cuts by the RBA anytime soon as inflation pressures still loom. The dollar is buying 0.6624 US dollars to end the week.
Stock of the Week
JB-HiFi (ASX: JBH) - Author: Luke Lyon (18/08/2024)
JB-HiFi (ASX: JBH) is up almost 9% on the week as it recently reported its 2024 yearly results, which saw total sales and net profit down by 0.4% and 16.4% respectively. But even as sales declined, a report by Morning Star observed that JB-HiFi is doing better than its peers. The ABS stated in the June quarter the electronics good quarter declined, but JB-HiFi Australia & New Zealand increased its sales. The company also announced an acquisition of e&s as it expands into new customer segments. Whilst economic conditions and consumer spending trends remain uncertain, the ability to strengthen sales displays JB-HiFi’s resilience, though the company’s profitability remains a concern.
Finance Article of The Week
CFMEU Enters Administration: Builders Push Back - Author: Luke Lyon (25/08/2024)
In an update to the CFMEU debacle, the entire construction division was placed into administration by the Albanese government Friday morning. The decision has resulted in removal of hundreds of branch officials across the country, marking a significant intervention in one of Australia’s most powerful unions. As CFMEU's influence wanes, builders are starting to push back, particularly on major projects like the $11 billion Sydney Metro line. Some companies are challenging the union's control over subcontractor selection and holding out signing new deals with the union. This could signify a significant shift in the construction industry’s power dynamics, especially as CFMEU’s future remains uncertain under administration.