That’s it from us for today team!

Catch you tomorrow for all the latest financial news from home and abroad.

Loading

The Australian share market has closed lower on Thursday amid a boost in retail sales.

Shares in Star Entertainment finished the day -33.3% lower $0.13c after the company made a late announcement on Wednesday it was running low on cash.

Arcadium closed out Thursday +8% higher to $9.14 after Rio Tinto’s takeover was approved in the United States.

All but three sectors closed in the red.

Basic Materials saw slight gains +0.3%, Utilities and Healthcare were up slightly by +0.1%.

A typically insightful note from Westpac chief economist (and former RBA assistant governor) Luci Ellis.

Conventional wisdom has it that the weaker Australian dollar will give the Reserve Bank second thoughts about cutting interest rates, in part because it boosts inflation.

But Dr Ellis writes that the effects on inflation are relatively small.

“The usual rule of thumb coming from the RBA’s own estimates is that a 10% sustained depreciation typically results in an increase in the level of the overall CPI of about 1%,” she notes.

While the Australian dollar has fallen about 10% against the US dollar since a brief peak in September, against the broader Trade Weighted Index (TWI) basket of currencies that reflects our main trade flows, the AUD is only down 4%.

So that would imply a 0.4% increase in the level of the CPI.

But Dr Ellis also points out the key phrase there — “sustained”.

“Most importers and other users of foreign currency hedge at least some of their exposure,” she observes.

“If an exchange rate move is short-lived, prices actually paid in Australia might not move much.”

In other words, at these levels, a falling Australian dollar is not in itself enough reason to delay a rate cut if the RBA board otherwise feels it is justified.

“Domestic inflation pressures, and the outlook for the labour market, continue to be more important factors influencing the monetary policy outlook,” she concludes.

Australian shares have taken a slide on Thursday after a 0.8% rise in monthly retail sales in November.

The ASX 200 retreated -0.4% on Thursday afternoon to 8,313 points.

The Aussie dollar was making just US61.96 cents at 3:15pm.

Gold, Bitcoin and Brent Crude are also all down an hour before the market closes.

US Congressman Mike Waltz has agreed with Donald Trump’s view that the US should take control of Greenland.

During an interview with Fox News, Waltz said taking over Greenland would help deter Russia and China from controlling more resources.

“You have Russia that is trying to become king of the Arctic, with 60-plus ice breakers, some of them nuclear power,” he said. “We have two, and one just caught on fire.

“This is about critical minerals. This is about natural resources. This is about, as the polar ice caps pullback, the Chinese are now cranking out ice breakers and pushing up there as well. So it’s oil and gas. It’s our national security.”

The Arctic island’s government acknowledged the changing security dynamics in the Arctic and said it looks forward to working with the new Trump administration and other NATO allies to ensure security and stability in the region.

Trump has not ruled out using military or economic action to acquire Greenland, which is an autonomous territory of Denmark.

Greenland Prime Minister Mute Egede has stated that the island is not for sale and has asked Trump if Denmark could instead buy the US.

– Reuters 

Telstra has announced today it’s collaborating with Elon Musk’s SpaceX to bring Starlink technology to regional customers.

“The collaboration would enable Telstra customers to send and receive [texts] on a compatible mobile phone in most parts of Australia where there is a direct line of sight to the sky,” said Telstra Group executive Shailin Sehgal in a statement.

This is not the first collaboration between the two firms; in 2023, Telstra signed an agreement with Starlink to offer voice-only and voice-plus-broadband services in rural and remote areas of Australia.

– with Reuters

Swinging back to Australia’s latest retail sales data released today.

Ivan Colhoun, chief economist at CreditorWatch, says the figures show turnover has strengthened in recent months, consistent with improved consumer confidence.

“Within the data, there may be some signs of better promotional activity in some categories that will be helpful for the Q4 CPI.

“More broadly, the data is neither very weak nor very strong, which supports both the notion of the RBA Board beginning to reduce interest rates at its February board meeting given the pleasing CPI data of yesterday, and of the forthcoming Australian easing cycle being relatively moderate in scale, of the order of 50-100bps.”

CommBank Economics has also released a note on the latest figures.

It said the increase in spending is not surprising.

“However, the rise in spending has to this point not been as strong as the RBA had initially expected. Indeed, in our view, the increase in household consumption to this point has been muted and does not pose a risk to our view of interest rate cuts in the near term. We continue to look for a 25bp cut in February and a total of 100bp of easing in 2025, taking the cash rate to 3.35% by year end.”

The RBA’s next meeting is on February 17 and there’s another round of CPI and household spending data due to be released by the ABS before then.

Figures from China’s National Bureau of Statistics show the consumer price index crept up +0.1% last month year-on-year, slowing from November’s +0.2% increase.

Core inflation, excluding volatile food and fuel prices, nudged up +0.4% last month from +0.3% in November, the highest in five months.

Full-year CPI rose 0.2%, in line with the previous year’s pace and below the official target of about 3% for last year.

In addition to an electric vehicle price war that is entering its third year, discounting is now broadening across the retail sector to include bubble tea shops.

Cautious consumers are increasingly choosing to rent items rather than buy them — including items like handbags.

– with Reuters 

Capital Economics also expects central banks to continue to cut interest rates although as we heard from the Fed Reserve, Trump’s immigration and tariff policies are expected to limit cuts this year. 

“With world GDP growing at close to its trend pace we don’t generally expect demand conditions to provoke renewed inflationary pressures.

“There are some nuances to this story. High wage growth and inflation in Brazil and Mexico will force central banks there to keep interest rates above our estimate of the neutral level.”

Capital Economics has published a report with its forecasts for 2025.

Soft Landings for Major Economies

The US, China, and Europe are expected to grow moderately, avoiding severe downturns. US growth is expected to slow,  partly due to Donald Trump’s policies, but strong private sector balance sheets will sustain decent growth

China: Growth forecast to accelerate in early 2025 with fiscal and monetary support but will decelerate in the latter half and into 2026 due to structural challenges.

Eurozone: Slow GDP growth is expected as lower inflation and policy rates are offset by industrial sector issues and fiscal tightening.

Emerging Markets: Many will experience slower growth, except for the Middle East and North Africa region, where increased oil production will drive economic expansion.

Economists are somewhat divided on how positive the November retail sales were.

Though they jumped 0.8% in the month, that was slightly below the consensus of economist forecasts.

Nonetheless, Callam Pickering from Indeed says that shows the worst of the retail downturn is now behind us.

“Australia’s retail sector has turned the corner, with growth much improved over the past six months,” notes Pickering.

“In fact, growth over the past six months is the strongest we’ve seen over the past decade, excluding the pandemic.”

“Over the past six-months, Australian retail spending has increased at a 5.3% annualised pace — compared to annual growth of 3.0% — with conditions gradually improving month-by-month.

“Many households continue to struggle with cost-of-living pressures, but the latest retail figures suggest that the drag on the economy from that is beginning to wane.”

But JP Morgan’s Tom Kennedy is far more cautious about the latest retail numbers, tipping a big drop when December sales figures come out at the start of February.

“While the pace of retail spending suggests a step up in consumption into year-end, we remain cautious about reading too much into these data given the probability of payback next month,” he writes.

“Indeed, in the past two years strength in October/November has been unwound, to an extent, in the final month of the year, with sales contracting outright in both December 2022 and 2023.

“In the details, all of the reported subgroups posted gains led by departments stores (1.8%m/m), clothing retailers (1.6%m/m) and cafes/restaurants (1.5%m/m). Household goods (0.6%m/m) ticked higher, while non-discretionary consumption at food retailers (0.5%m/m) was also decent.

“In recent years department store and clothing retailers have experience the most volatility in the December quarter and we flag these sub-group as vulnerable to payback in upcoming prints.”

This is probably another case where the Reserve Bank will sit tight and look at those December numbers, which come out ahead of its February board meeting, to decide how healthy the Australian consumer sector really is.

The Australian share market remains down about halfway through trading.

The ASX 200 is down -0.5% to 8,303 points. 

All 11 sectors, except Healthcare (+0.2%), are in the red.

Education has fallen -2.7%, followed by Industrials (-1.2%) and Energy (-1.1%).

Arcadium Lithium leads the top movers up almost +8% after Rio Tinto was given permission to take over the company.

Star Entertainment is leading the bottom movers down a massive -24.4%  after it announced a concerning cash and liquidity position for the December quarter late on Wednesday.

The embattled Australian casino operator told the sharemarket it had available cash of $79 million at the end of December, a drop of $70 million from the previously reported September quarter.

We’ve had a couple of people ask why Arcadium Lithium shares have spiked today.

I had a look into the stock, which is currently up a whopping +8% to $9.15 — the highest since January 12 last year.

It opened high and is currently still the top performer on the ASX 200 .

The jump comes after Rio Tinto was given the all-clear by the Committee on Foreign Investment in the US to take over the company. 

The transaction is likely to close before mid-2025.

Cafes, restaurants and takeaway food sales also jumped +1.5%, and food retailing rose +0.5%. 

Here’s a handy chart to see the difference in spending in November 2024 compared to the month before.

Retail turnover rose in all states and territories.

The Bureau of Statistics’ Mr Ewing said spending in the Northern Territory “bounced back from two straight monthly falls following the end of the peak tourism season and adverse weather to see the largest rise of all states and territories”.

The jump in retail sales in November comes after 0.5% growth in October 2024 and 0.4% in September.   

Robert Ewing, ABS head of business statistics, said the figures proved the popularity of Black Friday “with promotional activity now stretching across the entire month of November, not just solely focused on the Black Friday weekend”.

All retail industries saw an increase in spending in November.

Department stores rose +1.8%, followed by clothing and footwear (+1.6%).

Household goods increased +0.6%.  

“Discounts were also seen in essential goods, with businesses in food retailing boosted by higher spending due to Black Friday price cuts and points incentives through rewards programs.”

Data from the Australian Bureau of Statistics (ABS) on Thursday shows retail sales increased 0.8% in November from October, to $37 billion. 

It rose 3% compared to November 2023.

Good morning everyone, this is business reporter Rachel Clayton here to take you through the rest of the day.

The Bureau of Statistics will be releasing the latest retail sales data in about 30 minutes so I’ll bring you the latest on that.

I’ve also got a story out today about a class action being launched against PayPal over its browser extension Honey. Let me know if you have any queries about the allegations. 

China’s official GDP figures for 2024 are being released this month. Analysts at ANZ say annual growth is expected to reach 4.9%, in line with their forecast and closely matching the official GDP target.

Here’s more from the note:

“GDP growth: We expect year-on-year GDP at 5.3% in Q4 2024, thanks to the significantly improved service production. This will bring the annual GDP growth in 2024 to 4.95%. China is likely to set an ambitious GDP growth target of 5% in 2025, higher than the market expectation of 4.5%.

Steady retail sales: Retail sales is forecast at 3.7% y/y, supported by aggressive campaigns of consumption vouchers and ‘trade-in’ program initiated by various local governments. The momentum is expected to continue until the end of Chinese New Year celebration (mid-February 2025).

Deflation continues: CPI is expected to drop to 0% in December, the weakest since January 2024. This is due to an overall decrease in food prices by 0.3% m/m. PPI is likely to fall by 2.6%, driven by lower metal prices.”

Hi John, that’s correct. Inflation for food prices is rising, however what some economists have noticed is that the rate at which it is rising is slowing.

So overall food and beverages inflation was 3.3%y/y in October but 2.9%y/y in November. So it’s still risen by 2.9%…but that’s less than 3.3%. Fruit and veggies inflation was 8.5% in Oct but 6% in Nov.

So you’re correct — food is still expensive and still rising, though hopefully the price rises are slowing down!

You can see more details for yourself here on the ABS website.