Market Minute: Jobs and inflation data in the spotlight
Local reporting season has seen solid results, led by big names such as NAB and Telstra; meanwhile, U.S. jobs and inflation data are positive, but markets are still predicting a 60% chance of a Fed rate cut
This week jobs and inflation data has been in the spotlight both here and in the US, while Australian reporting season rolls on with some solid results from blue chip names.
Hi, I’m Michael Malseed, Head of Institutional Portfolio Management here at Morningstar, and welcome to this week’s market minute. A short summary on what’s been happening in financial markets, and how we are positioning portfolios.
It was a busy week on the economic data front with jobs and inflation data released in the US. Non-farm employment grew 0.6% in January, showing a bounce back from a sharp decline that had been seen late last year. This saw the unemployment rate moderate slightly to 4.4%, having peaked at 4.5% in December.
Meanwhile core CPI increased 3.6% on an annualized basis, although the month of January tends to be seasonally elevated due to calendar year price increases.
Despite this positive data, the bond markets are still predicting a 60% probability of a rate cut at the Fed Reserve’s June board meeting.
Meanwhile Australia also reported a headline unemployment rate of 4.1%, which was steady. All eyes will be on CPI data which will be released next week. Bond markets are currently pricing no change in the official cash rate at the RBA’s next meeting in March.
Turning to equity markets, we saw solid results out of some big blue chip names during the Australian earnings reporting season. National Australia Bank (ASX:NAB) reported a 16% increase in 1Q profit on the back of improved net interest margin, lower loan impairments and solid cost control. Telstra (ASX:TLS) also reported a better than expected result on strong cost control, and lifted it’s interim dividend.
In terms of Morningstar’s portfolios in an uncertain world we aim to position to the portfolios to be able to deliver in a range of scenarios. We look to achieve this by utilizing valuation discipline and ensuring a diversity of portfolio return drivers.
As market leadership changes we think volatility under the hood will provide the opportunity sift through mispricing opportunities to set up for future performance.
That’s it for this week. We look forward to seeing you next Friday.
