In last week’s TISK I ran with the news the ASX had hit all time highs in Week 9 of 2024. Well, this week, it did it again. That’s because Jerome Powell, chief of the US Federal Reserve, told Congress the first Fed rate cut is “not far” away.
That was a relief for Barclays Australia, which following the Australian GDP read for Q4 of 2023 a few days earlier, called a Q3 cut from the RBA (NAB see one in Q4.) Australian GDP hit 0.2% in Q4CY2023, below ANZ estimates of 0.3%, confirming a quarter-on-quarter decline in GDP growth all through 2023. Then Powell made his comments days later. Cue fresh market records.
In short: economic chemotherapy is working the world over, though it’s not causing the great unemployment surge that was widely foreseen anywhere near as fast as orthodox economic theory would predict. It also isn’t able to solve a global housing crisis familiar to Australians playing out in multiple countries, including China. (Regarding unemployment, I know it sounds evil, but the long accepted belief has always been that high employment + wages = more people spending = inflationary pressure. We may need to re-write some books.)
Anyway. While the ASX200 hit a new record, it was really the All Ords that had the psychologically eye-grabbing number – that index has crossed the 8,100pts mark for the first time in history. This also coincides with record climbs in gold and bitcoin, which one Bank of America strategist believes has a lot to do with the fact US debt is climbing US$1T every 100 days – something I flagged in last week’s TISK.
This week we also also learned Donald Trump’s only real threat to his campaign, Nikki Haley, dropped out of the GOP race, all but guaranteeing we’ll see Biden and Trump go head to head later this year for yet another US election. How many voters will roll their eyes and fail to turn up out of protest remains to be seen. (Remember Trump is only 4 years younger than Biden.) In the meantime, Biden is getting the US Navy to help build a seaport to provide aid to the Gaza Strip – a move which a cynic would say is more to do with getting votes from Muslim-issue voters and those Americans who identify as Palestinian.
Still lingering in America: Goldman Sachs has cut Apple from its list of top stocks it gives to clients due to weak iPhone demand in China, and, the US government is considering fresh sanctions on Chinese microchip giants after China announced a US$27B fund to produce microchips domestically as America desperately tries to slowdown China’s ability to capitalise on the AI thematic at all levels – financially, militaristically, psychologically.
And so what about China? The Chinese ‘Two Sessions’ meeting – basically the biggest annual Chinese government policy-forming event of the year – ended up being a bit lacklustre, despite a lot of positive talk. A press conference typically attached to the conference was, this year, cancelled. New The Market Online writer Caroline Smith noted that investors were spooked by a lack of certainty around stimulus, EV demand, construction momentum, and generally how exactly China expects to clock 5% GDP growth this year as its economy clearly circles in the doldrums. China also claims that CPI has reversed from its deflationary status and returned to +0.7%. Personally, I can’t help but distrust the data.
Also: Sweden has joined NATO, and, a group of far left “eco-terrorists” have been blamed by Musk for setting fire to a Tesla factory in Berlin. Normal World. (Actually, talking about the European war, Pope Francis this week suggested Ukraine should show the courage to pull off a tactical surrender. That would put both the Vatican and the Russian Orthodox Church onto a soundboard not entirely dissimilar from that which Putin uses. Interesting stuff.)
Read what I’ve been reading here:
US Fed Chief tells Congress the world isn’t “far” from first US rate cut; markets go wild
Bloomberg
Barclays Australia call Q3 rate cut on 0.2% 14 GDP growth for Australia
HotCopper
China unveils 5% GDP growth target at pivotal meeting but investors unconvinced
HotCopper
China unveils US$27B fund to build out microchips in face of US sanctions
Bloomberg
US Government to give nearly US$3B to domestic nuclear energy proponents Bloomberg
Goldman Sachs cuts Apple from top stocks list on weak Chinese iPhone demand
Bloomberg
Elon Musk reportedly met with Trump in Florida
CNBC
Sweden has joined NATO
Reuters
Jonathon W. Davidson 