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US inflation continues in the right direction.

Local and global equity markets were mixed this week with contrasting signals across economic data including falling US inflation, a UK rate rise, and weakness out of China.

Westpac shares rose after the bank lifted its dividend by 15% and announced a first half net profit increase of 22% to $4 billion. Commonwealth Bank shares rose following its quarterly result with the bank reporting a net profit increase of 1% to $2.6 billion but said that net interest income was 2% lower in the quarter.

The Federal Budget surprised with a $4.2 billion surplus, a significant improvement from the last estimate of a $36.9 billion deficit, with stronger than expected revenue from mining, corporate and income taxes. The government showed some fiscal restraint, but no plans to fix likely budget deficits in the years to come.

Australian new house lending rose by 4.9% in March, the first increase since January 2022, with lending to owner occupiers rising by 5.5% and to investors by 3.7%. Lending to first home buyers rose by 12.3%. The rise for the month was a big shock and may put further pressure on the RBA to maintain tighter monetary conditions.

Australian building approvals in the first quarter were the weakest in 11 years whilst business conditions fell in April. Australian retail trade volumes fell by 0.6% in the March quarter. Outside of the covid period, this was the largest quarterly fall in volumes since the GFC. Cost of living pressures along with higher interest rates finally hitting home.

US consumer prices rose at a 4.9% annual pace in April, slowing slightly from March and coming in below expectations. The annual core figure, which excludes food and energy, rose 5.5% in April down from 5.6% in March

German industrial production fell more than expected in March which saw recession fears escalate in Europe’s largest economy. Production decreased by 3.4% on the previous month partly due to weak performance by the automotive sector.

The Bank of England hiked rates by 0.25% to 4.5% at its May meeting, bringing interest rates to their highest level since 2008. The lift was widely expected.

China’s consumer inflation slowed to the weakest pace in two years in April while producer prices fall deeper into deflation. Stimulus likely to be required but authorities playing the waiting game for now.

US Treasury Secretary Janet Yellen said there are no good options for solving the debt ceiling stalemate and cautioned that resorting to the 14th Amendment would cause a constitutional crisis. There is a deal to be had, but President Biden is holding Congress hostage by not being amenable to any future budgetary cuts. US deficits are out of control and getting larger.