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Crispin Murray: What’s driving Aussie equities this week

Here are the main factors driving the ASX this week according to our head of equities Crispin Murray. Reported by portfolio specialist Chris Adams.

EQUITIES remain range bound, having absorbed a material rise in bond yields without breaking down through technical support levels.

The S&P 500 gained 1.96% last week, helped by stabilising bond yields and a weaker US dollar.

The S&P/ASX 300 was flat (-0.03%). Gains in the resource and energy sectors offset a decline in REITs and domestic cyclicals.

Weak results in discretionary retail and concern over impending rate hikes weighed on the latter. 

There was limited news in the wake of reporting season and the market remains braced for further signals from central banks.

Fed chair Jay Powell provides his semi-annual Monetary Policy Report to Congress this week.

The decline in equity markets this year has helped tighten the “Total Financial Conditions” index – a measure of changes in key indicators such as mortgage rates, credit spreads, equity markets and currency moves – possibly allowing the Fed to be more balanced in its comments.

This suggests the market should be reasonably well supported for now, as long as growth and inflation don’t continue to surprise to the upside.

Elsewhere, resource and commodity prices have been stronger in hope of positive statement from the Chinese National People’s Congress. Though the signals indicate less stimulus for growth than many anticipated.

Economics and policy


The National People’s Congress, which officially starts Xi’s third term and introduces many new faces at top posts, announced a target of 5% GDP growth for this year.

Beyond the Numbers

Crispin Murray’s
biannual ASX outlook


This is down on last year’s 5.5% target – though up from the 3% that was actually achieved.

There had been hope of a higher target – somewhere near 6% – to reflect the re-opening of China’s economy.

The 5% target – despite an environment of potentially strong “revenge spending” by Chinese consumers – suggests Beijing is not planning material policy changes to stimulate growth, particularly in housing and infrastructure.

This may be prompted by fears around inflation.

This is consistent with local government bond quotas, which are traditionally used to fund investment and are lower than last year.

Beijing is targeting employment stability, with a goal of maintaining unemployment at 5.5%.


The latest Institute for Supply Management’s (ISM) Services PMI came in at 55.1 for February, versus 55.2 in January and 54.5 expected.

The new orders component was particularly strong, though the price outlook fell (which is a positive).

This puts paid to theories that the strong reading in January data was an aberration.

It reinforces the issue that the US economy remains too strong to enable inflation to slow sufficiently at the current rate setting.

Service sector resilience is supported by other surveys which note continued strength in restaurant spending.

Anecdotes from home builders suggest the year has got off to a better-than-expected start, despite continued high mortgage rates.

The ISM manufacturing index came in at 47.7 versus 47.4 in January – and below an expected 48.

This suggests manufacturing remains weak but is not deteriorating. New orders are improving and there are no signs yet of significant impending job losses.

US Non-farm business output per hour data – a measure of productivity – continues to decline as we see the pandemic boost unwind.

The economy continues to recover employment without driving additional growth. This potentially signals labour hoarding. It may also indicate job growth in lower-productivity sectors.

Central bank action

The market is locked in on a 25bp from the US Fed.

While economic data has been stronger since last meeting there are emerging signs of easing labour market pressure.

This should encourage the Fed to be patient and stick to the plan of 25bp hikes – while focusing more on the duration of rates at higher levels to deal with lingering inflation pressure.

The European Central Bank is in a greater bind, since inflation data has been materially worse than expected.

European core inflation expectations have risen from 5.2% to 5.6% with the release of regional data, leading to a step-up in inflation and rate expectations.

A 50bp hike is the likely outcome and the tone of comments will probably be quite hawkish given the fear of inflationary pressure on wage negotiations.

The market expects another 50bp in May.

The Reserve Bank of Australia is expected to hike 25bps on Tuesday.

We are watching to see whether it eases back on recent hawkish rhetoric. The RBA may be able to point to some early anecdotal signs of a softening economy, though these are limited and not yet sufficient to offset an apparent strong economic momentum.

While we’re seeing a significant rise in household interest payments, the total as a share of household income is still well below that seen in the GFC, given the growth in income in recent years.

This suggests a soft landing is possible.

But it may also signal the need for rates to rise beyond market expectations.


The S&P 500 bounced off its 200-day moving average last week, which is a significant support level.

The sell-off this year has not been marked by higher volatility and breadth has been narrower, which is constructive.

The Australian market continues to be resilient.

The domestic and rate-sensitive part of the market was down last week after a signal of inventory building in the Harvey Norman (ASX:HVN) result.

This was offset by a bounce-back in resource stocks after a weak February.

Overall, resources were weakest during reporting season, as sentiment on China faded and results showed an increase in costs.

Discretionary retail was weaker as market concerns around domestic interest rates rose.

This led to underperformance in the banks, which were also affected by fears of margins rolling over due to strong competition.

Earnings season winners tended to be companies where fears had built but did not eventuate in the result. Examples include:

  • Medibank Private (MPL)– where the cyber-attack had minimal impact on customers
  • Orora (ORA) – where no evidence of a US slowdown was evident
  • QBE (QBE) – which delivered an in-line result with no new surprises and a clever reinsuring of the highest-risk part of its back-book
  • Ampol (ALD) – which is seeing margins recover in its convenience retail business


About Crispin Murray and Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out more about Pendal Focus Australian Share Fund  

Contact a Pendal key account manager

This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at March 6, 2023. PFSL is the responsible entity and issuer of units in the Pendal Focus Australian Share Fund (Fund) ARSN: 113 232 812. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

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