Market Insights Today: Oil over $85, Yields fall Equities charge on Peak Hawkishness past tense thinking– Oct 26, 2022

The US major indices, the Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) lift for the 3rd day

Crude oil (CLX2 & LCOZ2) rises over $85 on near supply tightness and some thinking the Fed will slow its pace of hikes 

Three US economic data sets released over the last two days are pointing to the US economy souring, which could indicate the US Federal Reserve’s rate rises have been working and may perhaps persuade the Fed to slow its pace of hikes. This could be seen as a positive signal for fuel demand. Consumer Confidence fell, while the S&P Core Logic Case-Shiller 20-City House Price Index also released Tuesday showed home prices fell 1.3% in the 20 core cities studied month-on-month, but were still 13.1% higher than a year ago. The day prior we had S&P Global’s flash US Composite PMI Output Index, that tracks the manufacturing and services sectors, falling to 47.3 this month from a final reading of 49.5 in September
 

Australian Govt budget winners are green energy, infrastructure, healthcare and parents 

A sector to watch is green transformation. With the AUD$20b to be put toward Australia’s transformation to net zero. The government outlined a large fund to mitigate climate change risk and support the transformation to net zero, with the funding going toward recently commenced projects on windfarms in VIC and the TAS Marinus Link project, while also delivering cheaper infrastructure loans for investment into renewable energy, in order to lower energy costs and achieve net zero over the coming years. Focus will be on lithium, rare earths, hydrogen, with companies like Pilbara Minerals, Allkem, Lynas and Iluka on watch.  

Another sector to watch is building, construction, infrastructure and mining. With the introduction of the national Housing Accord between government and other industry bodies, there is a target of building one million new homes over 5yrs, starting mid-2024. The government will establish a AU$10bn housing Australia future fund, with an aim of providing 20k new social housing dwellings. AU$350m will be spent over 5yrs in delivering 10k affordable dwellings, with state governments to provide another 10k homes. The government also committed to its pre-election promise of a shared equity scheme, allowing eligible people to buy a house with a smaller deposit. Focus will be on stocks like Transurban, Abbri and eyes will also be on banks that could benefit from housing polices, so CBA, ANZ Bank, NAB, as well as Westpac as well as Suncorp and Bank of Queensland  

Another sector to watch is health and aged care. The Government will spend AU$787.1m over four years on making a greater co-payment for prescription drugs, starting next year. Moreover, the government pledged to open 50 Medicare urgent care clinics, expand access in suburbs and regions. Overall, along with a rise in spending on hospitals, and extending various COVID-19 support measures, the government has pledged AU$6.1b. Elsewhere, the government is committing AU$2.5b to improving aged care to improving aged care facilities and staffing issues. Focus will be on health care businesses like Ramsay Health, Sonic Health Care, ResMed as well as Healius and Australian Clinical Labs.  

And another big highlight was increasing child care subsidies and paid parental leave to drive female labour force participation. From July 2023, childcare subsidy rates will increase for all eligible families with annual incomes less than AU$530k, which would cover around 96% of families. The increase in paid-parental leave will cost AU$531.6mn over four years, starting in FY23. Each year from July 2024 to July 2026, the paid parental leave will increase by 2 weeks, with a total increase of 6 weeks to 26 weeks by FY27.