Daily Brief Macro: Australian Equities: Where are we now and more

• Australian economy remains sluggish, but some positives include recovery in small caps and resilience of Australian consumers
• Market volatility and narrow leadership driving unhappiness among active investors
• Resilience of Aussie consumer and strong retail results stood out in recent reporting season, with small caps and US housing exposure also notable themes

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• US monetary policy is accommodative and markets are buoyant, especially in commodities
• Investors need to be cautious about being overly bullish in current environment
• Similarities seen with 2006-2007 period, particularly in disruptions in copper supply and new technologies in metal recovery; investors should be wary of hype and potential risks involved

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• A surprise rise in EA unemployment reflects rounding rather than alarming weakness, with labour supply and demand still surging. Finland’s woes are more idiosyncratic.
• Supply has trended much faster post-pandemic, sustaining demand at its old trend without extreme capacity constraints. Migration has more than accounted for the rise.
• Ukrainians are dominating the flow and complicating the read through to disinflationary spare capacity. Wage growth is an even more critical signal when supply is uncertain.

• The US shutdown remains political theatre, with no real progress on deficit reduction or fiscal reform.

• Thailand’s baht is Asia’s strongest currency, but structural issues and weak growth outlook persist despite strong external balances.

• Regional PMIs show a mixed picture, with Thailand surprisingly strong, Taiwan weak, and India continuing to lead.

• Crude oil futures were sliding lower Thursday as benchmarks racked up a fourth consecutive retreat of the week, coming amid expectations of a further OPEC+ hike offsetting heightened geopolitical tensions.
• Front-month Dec25 ICE Brent futures were trading at $64.16/b (2035 BST) versus Wednesday’s settle of $65.35/b, while Nov25 NYMEX WTI was at $60.57/b against a previous close of $61.78/b.
• Briefings from OPEC+ delegates over the last few days have wiped out the previous week’s healthy gains, with the group now expected to bring back a second tranche of voluntary cuts at a quicker-than-expected pace.