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Weekly Brief Sheet - 16/05/22

Provides a market round up, a selection of useful data points we use for our investment analysis, and some interesting articles/charts we have noticed recently.

Stocks recorded another week of losses, as investors appeared to grow increasingly skeptical that central banks will be able to achieve a “soft landing” for the economy by raising rates enough to tame inflation without causing a recession.

It marked the sixth consecutive weekly decline for both the S&P 500 Index and the Nasdaq Composite and the seventh for the Dow Jones Industrial Average. At its low point on Thursday, the S&P 500 was down nearly 18% from its peak, well into correction territory but just above the -20% performance threshold that typically defines a bear market.

The US benchmarks pared some of their losses on Friday, helped by a rally in Tesla shares after CEO Elon Musk tweeted that his deal to buy Twitter—partly funded by sales of a portion of his considerable stake in the electric car maker—was “on hold.”

Headline US consumer inflation fell back a bit from March’s pace but not as much as expected, rising 8.3% year over year versus consensus estimates of around 8.1%; likewise, core consumer inflation (excluding food and energy) pulled back less than expected to 6.2% versus 6.0%. Core producer prices rose a bit less than expected in April, but March’s monthly gain was revised higher to a record 1.2%.

Particularly worrying to investors may have been the 0.7% monthly surge in consumer prices for services (less energy services), indicating that inflationary pressures were moving beyond manufacturing and energy supply chains and becoming more broadly embedded in the economy. Airline fares jumped 18.6% over the month, for example, the largest increase on record.

Also last week, Russia imposed sanctions on European Union (EU) energy companies, including Gazprom Germania, which was taken over by Germany last month. Russia’s state-owned gas company Gazprom then said it would cut shipments to Europe via the Yamal pipeline, which runs through Poland to Germany. Earlier, Ukraine’s pipeline operator stopped flows through one of the two pipelines transporting Russian gas through the country to Europe, blaming interference by Russian armed forces.

British investors absorbed news that gross domestic product of the UK unexpectedly contracted 0.1% in March, after stagnating in February, due mainly to a decline in service sector activity. The economy grew 0.8% in the first quarter, but this was below the 1.0% expected by economists and the 1.3% expansion that occurred in the fourth quarter of last year.

At home down under, shares partially recovered from this week’s sell-off on Friday as investors seemed to believe Australian tech stocks seemed oversold, with top gainers like Life360 rebounding 15% by the close.

The S&P/ASX 200 rose 1.9 per cent, or 134.1 points, to 7075.1 on Friday, but posted a weekly loss of 1.8 per cent. Not everything seems so peachy though, oil prices advanced for a third consecutive session as investors weighed the prospect of a European ban on Russian crude imports, Santos climbed 3.2 per cent to $8.05 and Woodside Petroleum rose 2.7 per cent to $30.40.

Gold miners were among the biggest laggards on Friday as the precious metal’s price dropped to $US1822 an ounce, despite the early indications of a period of Stagflation may be just round the corner.



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DISCLAIMER: This report has been prepared by H&G Investment Management Ltd (ACN 125 580 305; AFSL 317155) to provide you with general information only. In preparing this report, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither H&G Investment Management Ltd nor its related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. You should obtain a copy of the Information Memorandum before making a decision about whether to invest in this product.


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