Aus/NZ
The Australian market (ASX 200 Index, +0.4%) was up on Tuesday, a rebound in tech stocks helped shrug off Hawkish commentary from the RBA’s most recent meeting.
The RBA meetings minutes revealed that they had considered a 25-point hike in the last meeting and that the board had a “low tolerance for a slower return of inflation to target than currently expected”.
The NZ market (NZX 50 Index, +0.3%) edged higher as the slowdown in inflation was welcomed by the market.
NZ’s inflation for the third quarter came in slightly lower than expected, at +5.6%, below 5.9% increase anticipated by the market – and its lowest quarterly increase since 2021. In our opinion a small beat but not enough for the RBNZ to change from their Hawkish stance.
NZ Quarterly Inflation (CPI)
Markets now lowering the probability of a final hike by the RBNZ in November, with the hopes they might be done, with a slim chance of one more hike in February (which will be conditional). We feel like there is an equal chance of one more hike or that they are done. The next thing is when the much-anticipated cut comes, unfortunately it does not appear to be anytime soon, so lenders with mortgages rolling off next year or so are due for some significant pain for another 12-18 months and any cuts late next year will only be marginal. Only a major economic shock or highly deflationary environment will push the RBNZ to perform any significant cuts in 2024 that would be of any meaningful relief – we anticipate the RBNZ to remain Hawkish over the interim. No relief for mortgage holders anytime soon.
US
US Markets were flat overnight (S&P 500 Index) recovering from earlier losses as investors digest some strong set of earnings, which were offset by US Treasury yields rising to close to 16-year high. The 10-year US Treasury yield hit 4.83%, nearing 16-year highs following retail sales data coming in hotter than expected. US retail sales rose +0.7% in September, much stronger than the +0.3% anticipated by the market. Gas station sales helped propel the headline number, rising 0.9% as prices at the pump accelerated. It shows that consumer continues to spend, and when will its start to tail-off is the question
Tech stocks were weaker, Nvidia was down -4.7% along with other chip stocks being hit hard after the US department of commerce announced plans to restrict the sale of advanced AI chips to China.Bank of America shares rose +2.3%, as another major US bank’s earnings beat market expectations thanks to better-than-expected interest income. Goldman Sachs on the other hand fell -1.6%, its profit dropping -33% from last year to $2.058b. Trading revenue and investment banking services were weak which is a major source of earnings for the bank, given Goldmans has a lower skew towards lending versus other banks