Weekly market update - 15th of May 2023
Written and accurate as at: May 15, 2023 Current Stats & Facts
The financial market remained relatively stable during the week ending on 12 May, with no significant news causing major shifts. The highlight was the Federal Budget, which projected the first surplus in 15 years due to high commodity prices and a robust labour market. The budget managed to retain about 80% of gains, with increased social security benefits and a cost of living package expected to exert modest pressures on inflation.
The week also concluded the major bank's half-year reporting period. Downgrades were made to both current and forward-year estimates due to peaking net interest margins and an anticipated bottoming of bad debts.
The US inflation for April was slightly lower than expected, with an annualised rate of 4.9%. Combined with a weaker-than-expected headline PPI print, decreasing consumer sentiment, and increasing new job claim numbers, these factors provide further support for a potential rate pause by the US Federal Reserve in the near term.
The market performance saw the S&P/ASX 200 up by 0.8% for the week, with industrials at +1.1% and resources down by 0.3%. The US-based S&P 500 fell by 0.2% for the week, including a -0.2% move on Friday. S&P/ASX 200 futures point to a +0.1% rise to start the upcoming week.
The Federal Budget announced on Tuesday, predicted a $4.2b budget surplus for the year to June 2023, marking the first in 15 years. This is a significant turnaround from the -$36.9b estimate in the October Budget. Notably, the government retained about 80% of revenue upgrades, driven by robust commodity prices, strong employment, and wage growth.
The Commonwealth Bank of Australia (CBA) and Westpac (WBC) concluded their half-year reporting among other major developments. The emerging theme was the peaking of net interest margins, increased competition across retail deposits and mortgage pricing, and cyclically low levels of loan losses. EPS forecasts were downgraded for CBA, WBC, and ANs, with the National Australia Bank (NAB) seeing a significant reduction of -4.7%.
In other economic news, the annualised US inflation for April came in at 4.9%, lower than the forecasted 5.0%. Core CPI, excluding food and energy, met expectations at 5.5%. Other economic indicators, such as a softer headline PPI and rising initial job claims, suggest the possibility of a pause in the Fed rate.
Finally, the week witnessed significant share price moves, particularly in the S&P/ASX 200. Lake Resources experienced a substantial boost of +30.0%, driven by optimism about potential deals in the lithium sector. Other companies, such as Allkem Ltd and Core Lithium, also saw positive movements. Conversely, gold names such as Capricorn Metals and Silver Lake Resources experienced decreases due to a rebound in the USD.