InvestSense Market Update – May 2024

In Australia, the S&P/ASX 200 index experienced declines during most of last week but has recovered in recent days to end down just 0.3% at the time of writing. Inflation concerns weighed on sentiment, as unexpectedly high CPI data in April suggested that the prospect of interest rate cuts by the Reserve Bank of Australia may be more distant than previously anticipated.

This led to broad-based losses across sectors, particularly in industrials, consumer discretionary, and financials. A lower iron ore price on global growth worries also meant the big miners detracted but Anglo American’s rebuffing of BHP’s takeover attempt had the biggest impact.  

However, healthcare companies Telix Pharmaceuticals, Pro Medicus bucks the trend on encouraging results while Agricultural stocks like Australian Agricultural Co and Elders benefited from news that China had lifted its ban on Australian beef exports. Lastly, Dominos finally caught a bid, perhaps due to a ground breaking initiative as part of its Japanese roll-out strategy - pineapple injected into the crust mixed with mozzarella.    

Internationally, developed markets as measured by the MSCI World ex Australia Index declined by 0.5% in AUD terms, while emerging markets fared worse with the MSCI Emerging Markets Index falling 3.6%. U.S. stocks, as represented by the S&P 500, fell 0.5%, while European markets such as the Euro Stoxx 50 and the German DAX were slightly negative for the week. The Japanese Nikkei 225 was the best performing international marketer the past week after being the worst performer mid-week.

Nvidia continued to be a major focus in the U.S. market, with its stock contributing significantly to the tech-heavy Nasdaq's gains. However, the biggest moves during the week all happened on Friday in US trading when the Nasdaq fell by 2% before recovering most of those losses within hours.

In the first instance a weak result from Salesforce's raised concerns about the broader cloud software industry. The company's slowing growth, attributed to longer sales cycles for large deals and the lack of immediate payoff from the hype surrounding artificial AI, suggests that the sector may be facing challenges in monetising the huge AI related expenses it has incurred.

The jump in prices a few hours later was put down to month end rebalancing and all of this overshadowed the much awaited Personal Consumption Expenditures inflation print. As it happened it came in line with expectations at 0.25%.

Although the three and six month numbers remain elevated the direction of travel seems to now be in the right direction. Looking forward, attention will likely turn to economic growth and whether this better inflation news is due to a much needed easing of pressure in the US  economy or a sharp deceleration in the consumer economy.