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Weekly Brief Sheet - 17/10/22

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

The state of the Australian labour market will be a focal point this week as the national statistics bureau releases its monthly jobs data. In August, the jobless rate lifted slightly to 3.5 per cent as more people started looking for work after many bowed out of the job market due to winter illnesses. Commonwealth Bank economists expect to see around 20,000 jobs added in September and the unemployment rate to hold steady at 3.5 per cent.

US indexes were mostly lower last week, as third-quarter earnings reporting season began in earnest and investors weighed inflation data and their implications for Federal Reserve policy. By the end of the week, the S&P 500 Index had surrendered nearly half of its gains since its March 2020 bottom. Within the index, the typically defensive health care and consumer staples sectors outperformed, while consumer discretionary and communication services shares lagged, dragged lower by heavily weighted, Tesla, and Meta Platforms (parent of Facebook). Likewise, slower-growing value stocks handily outperformed their growth counterparts.

Stocks saw their biggest move on Thursday, with a sharp early drop followed by a 5.5% surge to the upside in the S&P 500 Index, marking its largest intraday move since March 25, 2020.

Unfortunately, Thursday’s CPI inflation data showed that lower wholesale prices were not yet filtering down in a significant way to consumers—the trend was, in fact, in the wrong direction. Core consumer prices rose 6.6% on a year-over-year basis in September. This was more than expected, above the previous March peak, and the fastest pace in four decades.

If there was a silver lining to the report, it was that the price increases were mostly concentrated in medical services, transportation, and housing. Shelter prices climbed 0.7% in September, accounting for 40% of the rise in the core index, but many observers expect the rapidly cooling housing market to eventually spill over into the Labor Department’s calculation of owner-equivalent rents and the rental market itself.


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