Markets were mixed over the week. While global equity and bond markets (Aust & global) were slightly higher, the local equity market was lower. This was off the back of a sharp fall in the resources sector. Commodity markets have been challenged over recent periods with copper and iron ore prices weaker, although both commodities have come off 12-month highs, with iron ore touching above US$130 p/tn while copper was just shy of US$11,00 p/tn. Given that Chinese growth continues to remain volatile, the recent dip in commodity markets is not to be unexpected.
That said, we continue to like the long-term demand/supply characteristics around both iron ore and copper and remain overweight both across our portfolios. In the US, headline CPI data was marginally lower (3.3%, -0.1% to f’cst) than market estimates, although looking through the data there were some clear outliers with (discretionary) aviation and household supply costs lower, offset by higher non-discretionary items in housing, transport and medical costs that contributed most to the CPI print. While the lower CPI was a positive and supported by lower input costs (via the PPI Index; -0.2% m/m), in our view the makeup of the data continues to point to a more cautious Fed outlook for rates. However, we retain our view that the Fed will look to reduce rates through the 4q24.
Domestically, the strength in both the household spending data (May) and jobs numbers (+8.9k to f’cst) was pleasing given the weak GDP print the prior week, but also reiterates the view that the RBA will remain on hold (f’cst 4.35%, no chg pcp) when it meets this week. We see the likelihood of one rate cut in Aust through the 4q24 but have ruled out any further cuts given the ongoing inflationary pressures. This week sees a raft of retail, housing and PMI data out of the US along with jobless claim numbers.
The PMI data for both manufacturing and services is f’cst to remain in expansionary territory (> 50.0pts), which will provide further support to growth assets. Domestically, it’s a quiet week outside the RBA (f’cst 4.35%, no chg), while CPI data in Europe (f’cst 2.6% y/y), Chinese industrial data (f’cst 6.2% y/y, -0.5% pcp), fixed property investment (f’cst -10.% y/y, -0.2% pcp) and retail sales (f’cst 3.0%, +0.7% pcp) will be the major focus for markets over the week.
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