ep 380 | The week ahead - Will strong earnings put markets in a better mood?
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What is the main topic discussed in this episode?
On Point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals or risk tolerance. All investments are subject to risks and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor. For more information about our services or to view the Craig's Investment Partners Financial Advice Provider Disclosure Statement, please visit our website which is craigsip.com. Welcome to On Point. I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education, and anything else that's happening out there in financial markets.
Hey team hope everyone is well last week was a little bit more of a tough one for financial markets despite some positives we did see a cooler US inflation report and the reporting season started well we had some strong bank earnings from the likes of JP Morgan & Co Those things weren't enough to offset the nervousness, and there have been several reasons for that. For a start, US crude oil has increased almost 19% this month, July, and it finished last week over $82 a barrel. That's the highest in about a month. because of those middle east tensions that have reignited so that has added to concerns over mounting inflation pressures and we also had a couple of fed officials talking last week and the comments were on the hawkish side that pushed interest rates a little bit higher and got people talking about fed rate hikes again investors have also continued to sell chip stocks and tech exposures on the back of concerns over valuations we saw the philly semiconductor index dropping to an
eight-week low. That sees it down 20% from its peak, which came not even a month ago. We also had increased capital expenditure plans from TSMC. That's the Taiwan Semiconductor Company. And there was a disappointing earnings release from Netflix as well, which added to those concerns. So most equity markets were soft. The S&P 500 index in the US was down 1.6%. Japan was off a little bit more than that, down 2.9%. and emerging market shares were off 4.1%. Emerging market shares contain the South Korean market, which has got a lot of those memory stocks as part of it, so a little bit more volatile. The only major market to rise, I think, was the UK. The UK market was up 1%. Not a lot of tech exposures. It's very much an old-school market.
So just like we saw in 2022, if you cast your mind back to when you saw the NASDAQ and the other tech stocks and growth stocks rise, fall heavily the uk outperformed back then and it's outperforming at the moment too closer to home the asx 200 in australia was down marginally down just 0.1 and the local nzx 50 was off 0.7 last week Interest rates, U.S. Treasuries literally changed at just over 4.5%, while here in New Zealand the five-year swap rate was up about 12 basis points, finished just under 4%. The OCR is at 2.5% right now, and markets still see two further 0.25% hikes this year. So that would see the OCR end the year at 3%, which is pretty close to neutral. by most people's estimates. Maybe neutral's a little higher than that, but 3% certainly that low end and in that neutral ballpark.
Right, let's talk about some of the key releases and what did we have. US inflation, this was good news. Came out on Tuesday, so it was Wednesday in New Zealand. Very good news. It slowed sharply in June and it was below expectations. So the CPI fell 0.4% for the month. That's a bigger decline than the 0.1% fall that was expected, and it was actually the biggest fall since April 2020. That was driven by the decline in oil and fuel prices, and that saw the annual rate of inflation fall back to 3.5%. In May it was 4.2%, and now it's come back to 3.5%. Forecasts were for it to fall back, but only to 3.8%, so it fell back a little bit further than that. So
Why were markets nervous despite cooler US inflation and strong bank earnings?
That is good news, although like I said earlier, Federal Reserve officials were out on the speaking circuit and the comments were on the hawkish side, so markets still see at least one rate hike from the Fed this calendar year.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–4:16
2
Why were markets nervous despite cooler US inflation and strong bank earnings?
4:16–6:18
3
How did rising US crude oil and Middle East tensions affect inflation expectations?
6:18–9:43
4
Why are chip stocks and tech exposures under pressure right now?
9:43–14:35
Speakers
1 identifiedMore from On Point
ep 399 | What does a Fed hiking cycle mean for markets?
ep 398 | The week ahead - NZ dollar slumps to a 15-year low
ep 397 | Are bonds back to the old normal?
ep 396 | The week ahead - Have oil and inflation forced the Fed's hand?
ep 395 | The week ahead - The report that could determine the Fed's next move
ep 394 | Value, growth, or a bit of both?