July Market Summary
Sector Performance
- Inflows: Banking, Discretionary, Utilities, and Technology sectors attracted significant investor capital, reflecting defensive positioning and optimism around AI and semiconductor developments.
- Outflows: Materials, Industrials, Consumer Staples, and Telecoms saw capital outflows, driven by inflation risks and signs of weakening economic demand.
Commodities Overview
- Iron Ore: Influenced by China’s struggling property sector. Further analysis provided in this report.
- Copper: Challenges persist with China’s economic rebound, compounded by inventory drawdowns in manufacturing.
- Crude Oil: Prices supported by seasonal summer demand and short covering in futures markets.
- Natural Gas: Supply increases are outpacing summer demand, exerting downward pressure.
- Aluminum: Impacted by China’s sluggish recovery and weakening coal market.
Housing and Vehicle Trends
- Housing: May house prices rose by 6.8%, attributed to low supply and increased immigration.
- Vehicle Sales: April sales were down, though market data suggests recovery in May and June.
Macroeconomic Indicators
- GDP Per Capita: Declining due to the combined effects of inflation, immigration, and rising energy costs.
- Retail Sales: May expectations indicate a modest 0.7% increase, signaling constrained consumer activity.
- PMI: Falling at the fastest rate since 2020, reflecting slowing procurement activity.
- Producer Prices: Increased in Q1, with predictions of continued growth through Q2.
Trade and Exports
- New Orders: Weakening based on PMI and consumer data.
- Exports: April exports hit a 28-month low, driven by reduced commodity demand.
- Balance of Trade: Supported by weaker imports relative to exports; however, both contracted.
Interest Rates and Inflation
- 10-Year Yield: Rising amid inflationary pressures and expectations of further rate hikes.
- Inflation: Australia’s inflation rate rose to 4% in May.
- Deposit Rates: Unchanged at 3.5%, despite the Federal Funds rate at 4.35%, resulting in real rates yielding negative 0.5%.
Government Spending
- Fiscal Policy: Increased government spending, coupled with energy credits, is expected to contribute to inflationary tailwinds.
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