XM Weekly Market update Oct 25

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00;00;05;21 – 00;00;11;16
Andrew Musgrave
Good morning. Welcome to the XM dot com weekly market update. We’re joined again by Pete McGuire, the CEO of XM Pete.

00;00;11;17 – 00;00;12;26
Peter McGuire
Good morning. Good morning, Andrew.

00;00;13;11 – 00;00;16;04
Andrew Musgrave
Once again, plenty of activity. Wow, data.

00;00;16;16 – 00;00;17;17
Peter McGuire
What a week it was.

00;00;17;18 – 00;00;30;21
Andrew Musgrave
What a week. Well, we’ll touch on the UK and China shortly because there’s a huge amount of activity happening there. But firstly, domestically, employment. Unemployment rate came out again last week, 3.5. Very low number.

00;00;30;21 – 00;00;33;04
Peter McGuire
But you want a job. You get a job very much.

00;00;33;09 – 00;00;40;18
Andrew Musgrave
And that’s what we’ve seen for a long time now. And you I think just out on the street, there’s just so many opportunities available.

00;00;40;19 – 00;00;48;25
Peter McGuire
Every coffee shop you go to thereafter, barista, every pub you go to, they want to buy them or buy a lady or someone. That service industry is just exploding. And.

00;00;49;05 – 00;00;52;26
Andrew Musgrave
And I think as people are more getting back out to socialize.

00;00;52;26 – 00;00;53;24
Peter McGuire
Is absolutely laid.

00;00;53;24 – 00;00;57;25
Andrew Musgrave
Out. Unfortunately, the downside of that is the shortage of workers.

00;00;58;05 – 00;01;07;22
Peter McGuire
And you can’t complain at a restaurant, which you should in anyway. But the old story, well, we’ve got four people doing six people’s job. We can’t get staff. So it might take an extra 20 minutes to get served.

00;01;08;01 – 00;01;22;00
Andrew Musgrave
It makes it tough. I think you got to be interesting to see where that leads to. If the immigration starts picking up again, which obviously the government wants, that this may alleviate some of that problems. But that’s up to six ultimately. And it takes a quite a long time to fly through.

00;01;22;01 – 00;01;25;09
Peter McGuire
Yeah, well, you’ve got to be qualified also to be able to do the role.

00;01;25;24 – 00;01;38;01
Andrew Musgrave
They’ll need to get those are uni students back in quick like so yeah. So the CPI that comes out this week as well in Australia, so the 6.1 was the last number you’re anticipating 7% this time round, which is quite a jump up.

00;01;38;03 – 00;01;39;09
Peter McGuire
It’s 50% jump.

00;01;39;10 – 00;01;41;02
Andrew Musgrave
Yeah, but not unexpected now.

00;01;41;02 – 00;01;57;23
Peter McGuire
Not unexpected, but I’m looking forward to see where we are by Christmas because it’s coming out as a monthly metric and are we going to be approaching that eight and a half number by Christmas? And that’s really going to put some pressure on the RBA and the whole I think, you know, the economy overall.

00;01;57;23 – 00;02;11;25
Andrew Musgrave
They might go back to the 50 point basis point rises. Yes, but we’ll wait and see what this number comes out. First of all, later this week. Sure. Maybe up the China. Plenty of activity up there with the National Congress being cementing his power.

00;02;12;02 – 00;02;14;04
Peter McGuire
Yet Hu Jintao frog marched out.

00;02;14;04 – 00;02;33;01
Andrew Musgrave
Yes, I know. It was very interesting to watch the this is a 30 year chart. So give me an idea. I think ignoring the pandemic because that’s like massive, massive swing there. But it just goes to show how strong it was for such a long period of time. Yes. Yet the latest number came out of about three and a half per cent there, anticipating five and a half years.

00;02;33;02 – 00;02;34;06
Peter McGuire
That’s 40% down.

00;02;34;06 – 00;02;41;07
Andrew Musgrave
It’s a big it’s a big difference. And yet which is not surprising considering how the country is being run at the moment. Recover.

00;02;41;11 – 00;03;04;20
Peter McGuire
Exactly right. The CSI 300, just to give you a sense and I think another view from a market perspective was that it was at about 5800 going back two years ago now to 3600, had a big wash out yesterday, down 3%. Hong Kong was down nearly 7%. So yeah, that was the I think the overall feeling from these and other five year all the impact it’s having to markets.

00;03;04;28 – 00;03;11;16
Andrew Musgrave
And I don’t think not that they can do much about it but I suspect the people in Hong Kong wouldn’t have too happy. Now what I heard, well.

00;03;11;26 – 00;03;17;09
Peter McGuire
Well, they’re not happy. But the real frightened ones, I’m sure are going to be the Taiwanese.

00;03;17;10 – 00;03;28;21
Andrew Musgrave
Yeah, well, that’s true. Yes. And the unemployment rate came out as well. It’s only jumped slightly 5.5. But once again, that’s not surprising considering most of the country is still in lockdown. Yes, it’s it’s.

00;03;28;21 – 00;03;30;12
Peter McGuire
A big number on 1.4 billion.

00;03;31;02 – 00;03;31;20
Andrew Musgrave
It is. Yes.

00;03;31;20 – 00;03;35;00
Peter McGuire
So and that creates unrest?

00;03;35;00 – 00;03;39;04
Andrew Musgrave
Certainly does. And it sounds like there’s plenty of unrest out there on the line, particularly in the property market.

00;03;39;04 – 00;04;05;08
Peter McGuire
So 90 million apartments uninhabited, right? 90 million big number and $62 trillion worth of value is the Chinese property market. It accounts for about 31% of the overall economy. So it’s an enormous segment and we all understand what’s going on with developers and the yeah. The impact. You’ve got a very, very weak yuan been smashed to the downside against that US dollar.

00;04;05;08 – 00;04;10;26
Peter McGuire
So yeah they’ve got some problems like hey that’s the problems, it’s who’s holding the debts got the problem area.

00;04;10;27 – 00;04;21;17
Andrew Musgrave
Was moving to another area that’s got a few problems the eurozone we a look at the euro there and you look at the trade balance, which is a massive negative number.

00;04;21;18 – 00;04;40;28
Peter McGuire
Yeah, it’s in tandem with the with the euro. It is. And just seems to be in continual freefall. That trade balance in the euro still sitting at that 97, 98 handle against the US dollar. It’s back at 112 the US dollar this morning. So where we’re going as far as rate rises, you’ve got a rate rise coming in I think this week for the ECB.

00;04;41;07 – 00;05;01;14
Peter McGuire
So they’ve got to be is it going to be 100 basis points? People are saying, well, no, but there are analysts out there saying we’re going to play catch up real quick. And we’ve they didn’t frontload like the Fed not so they need to really play now. It’s got to be, you know, those big leaks to try and solve the inflation story.

00;05;01;14 – 00;05;11;27
Andrew Musgrave
Well, that’s right. And I need to get that the currency, because I like it since it just fuels inflation, it harms growth. So do they do they get 100 basis points and just go hard going quickly? We’ll see.

00;05;12;09 – 00;05;13;15
Peter McGuire
We will see this week.

00;05;13;24 – 00;05;27;26
Andrew Musgrave
Simply that it’s an interesting chart here where obviously the what the euro is doing, but that that gas prices come down a huge amount there, which you would hope would augur well for coming into the the colder months. But absolutely. Certainly a big change.

00;05;27;29 – 00;05;53;18
Peter McGuire
Yeah, very much so when you come to know the numbers there. And that was incredibly a lot of hurt there in the middle of the year. And everyone was wondering, you know, 300, 350 then that per megawatt hour. But then seeing that big crash, we’re very worried globally. 25 days with diesel you have in the United States and the overall diesel supply, which is so important for shipping for all forms of transportation and across the world.

00;05;53;18 – 00;06;01;08
Peter McGuire
And there’s a critical shortage as far as diesel and supply chain. So let’s look at that one maybe in some time in November, but it’s not looking good.

00;06;01;26 – 00;06;20;08
Andrew Musgrave
So GDP, US numbers are coming out this week? I believe so. Once again, we’ve had two quarters of negative growth there, anticipating it to be positive this quarter, which once again, they they say, you know, one of the most resilient people, I think American consumers. Yes. They like to spend.

00;06;20;09 – 00;06;22;11
Peter McGuire
They certainly do. And you’re coming into Christmas.

00;06;22;11 – 00;06;30;26
Andrew Musgrave
Yeah, that’s right. So the back end of the year, they saw that number will be positive this week, but it will be. We’ve got a ton of economic data out of the states this week as well. Yeah, sure.

00;06;31;04 – 00;06;38;08
Peter McGuire
It’s a big week. We’re watching it by the hour. And, you know, our analysts and certainly global traders are really all over it. So it’s a bit of fun and games.

00;06;38;08 – 00;06;50;22
Andrew Musgrave
And there’s been a bit of an inkling there about the Fed’s next rate rise, or maybe not the next one. The one after may not be as aggressive, so. Well, that’s right. The central banks now starting to consider.

00;06;51;15 – 00;06;53;04
Peter McGuire
Putting the handle on the brakes.

00;06;53;04 – 00;07;01;08
Andrew Musgrave
A little bit. Still put rates up, but maybe not as hard. Yes, but they still anticipate the next one will be 75 basis points. Exactly. Which will then obviously just add to the.

00;07;01;17 – 00;07;01;28
Peter McGuire
Well that will.

00;07;02;00 – 00;07;04;15
Andrew Musgrave
Continue the continued strength of the US dollar. Yep.

00;07;04;28 – 00;07;22;18
Peter McGuire
Two weeks today we’ve got the election and that will be interesting to see whether it’s going to be a well, either it’s going to be dramatic as far as, you know, the Republicans in power Congress and Senate or. Yeah, I know one can. No one knows. But the many rumblings out there.

00;07;23;01 – 00;07;40;25
Andrew Musgrave
And I think with the midterms as well, historically not that it repeats, but the share market historically has done very well for the next six months following midterms. So yeah, well, this may be the same case, who knows? But and just on that, with with earnings, obviously we’re in the thick of earnings season. Yeah, it’s a very big week this week in the States for earnings.

00;07;40;25 – 00;08;05;29
Andrew Musgrave
A lot of the big companies coming out. This is just a very small snapshot of the some of those the global super powerhouses are just they just earnings juggernauts, all of these companies. But that’s showing Amazon obviously a bit more expensive than the others. But that’s it. Does they just they just churn and churn and they’re just earnings powerhouses.

00;08;05;29 – 00;08;07;20
Andrew Musgrave
And sometimes you have to pay off for that.

00;08;07;27 – 00;08;20;12
Peter McGuire
You’ve got to pay because you’re looking at future earnings. And that’s what it’s all about. That’s what stock traders are after on a metal has been crushed as far as a share price. So yeah, it’s all fun and games at the moment for some of those Nasdaq stocks.

00;08;20;12 – 00;08;27;13
Andrew Musgrave
Yeah, but it’s just looking on the surface, you know, it certainly likes Apple, Microsoft and Alphabet look attractive and things like.

00;08;27;14 – 00;08;29;13
Peter McGuire
Yes, very much so.

00;08;29;13 – 00;08;45;10
Andrew Musgrave
You would sort of think if there is a turn in the equity markets whenever that may be, you would think a ton of money will pull back into those stocks because they’re down anywhere between 20 or 30% already and the fundies will be all over that. Maybe not this week, but in the coming months. Well, I hope.

00;08;45;10 – 00;09;09;18
Peter McGuire
Robert Psaki’s not correct because it came out last week and said the best we can do is a depression, the worst we can do is a civil war. So I that he said that last week. So we’re got some again some real interesting I think process is working through in the United States and how the Biden administration manages many different components of their economy.

00;09;09;29 – 00;09;22;08
Andrew Musgrave
There’s a lot of a lot of commentary out there in that pages and a lot of it is all rich clickbait all year. What do you think? Wow, it’s just they just sort of saying something to create a reaction. Yeah.

00;09;22;26 – 00;09;26;03
Peter McGuire
What happens? It has to to try to sell their mindset.

00;09;26;08 – 00;09;37;09
Andrew Musgrave
But I think this earnings season, especially now that the interest rates have had a reasonable chance to flow through the economy out of this sort of impact that does have. So it could over the next few weeks.

00;09;37;11 – 00;09;38;23
Peter McGuire
Yeah going to be fun and games.

00;09;38;24 – 00;09;46;01
Andrew Musgrave
Excellent good stuff thanks for coming in it season and that’s the XM dot com weekly market update.

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