European theatre

Delivered on By Justin Pyvis

Good morning! The first reading of consumer confidence following the election result “was virtually unchanged” from a week ago (-0.1%), and remains “a significant 20.7pts below the same week a year ago”.

Maybe our politicians don’t matter as much as they like to think they do. πŸ€·β€β™‚οΈ

But something that does matter is inflation, and expectations are for higher prices to stick around despite the RBA’s rate hikes, with the 2-year ahead figure rising “to 5.5%, its highest level since early April”:

Introductory image.

Reading the tea leaves

Daily % change







AU Bond



US Bond









Brent (bbl)



Gold (oz)



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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

TheΒ US S&P500Β fell -0.63% following hawkish comments on Monday by Fed Governor Christopher Waller, who said the Fed should be prepared to go ahead with 50 basis point increases every meeting until inflation is curbed.

That was more than enough to offset relatively positive data, including the Conference Board’s measure of consumer confidence, which fell 2.2 points to 106.4 in May, above expectations of 103.9.

Also released was the the S&P CoreLogic Case-Shiller Home Price Index for March, which showed that prices across the US were 20.6% higher than they were a year ago despite rising mortgage rates, “the highest year-over-year price change in more than 35 years of data”.

Locally, theΒ ASX200 fell -1.03% with all 11 sectors finishing in the red, reversing almost all of Monday’s gains. The biggest drag on the index were financials (-1.99%) as the nation’s banks all tumbled, led by Suncorp (-6.35%) after Morgan Stanley downgraded the Queensland-based bank due to “structural risks stemming from climate change”.

Food for thought

The EU's latest sanctions make for good headlines but will do little to curb Russia's war effort.
The EU's latest sanctions make for good headlines but will do little to curb Russia's war effort. Source

European theatre: The EU agreed to cut around 90% of its oil imports from Russia by the end of the year. But there’s a catch – it only applies to seaborne oil, with pipeline crude given “a temporary exemption”, despite being included in the 90% estimate:

“Import prohibitions on crude oil from Russia should temporarily not apply, until the council decides otherwise, to imports by pipeline of crude oil from Russia into those member states.”

Exemptions are also being handed out like candy:

“Some countries will also have a longer transition for the seaborne oil ban. For Bulgaria, a transition period until June or December 2024 is envisioned, while Croatia could get an exemption for imports of vacuum gas oil, which is used to make products including gasoline and butane.”

Bizarrely – or perhaps completely expected given how the EU operates – Hungary’s Viktor Orban had his request for a four-year delay along with EU funding worth €800 million approved, although the deal hasn’t been signed off because of “a separate row over a Brussels order for Orban to ditch legislation outlawing the ‘promotion’ of gay and trans rights”.

So, six months after these measures are eventually ratified by the 27 member states the seaborne oil embargo will take effect in some countries, assuming they don’t request further delays/exemptions. In the meantime, Russia will have established stronger links to Asia, the war will be over and the sanctions won’t matter.

Bravo. πŸ‘

Aussie data dump: Building approvals fell -2.4% in April, a result that was worse than expected following the huge pull-forward in demand on the back of targeted state and federal post-COVID stimulus. However, housing credit growth picked up +7.9% from a year ago as investors – who generally purchase established homes – more than offset a slowdown in the growth of owner-occupier debt.

Elsewhere, business credit growth jumped a solid 11.6%, suggesting there’s still some life left in the investment pipeline. Corporate profits soared 10.2% from the prior quarter, a result driven entirely by the mining sector (profits elsewhere fell -1.8%).

Finally, Australia’s trade surplus shank around $5.7 billion to $7.5 billion in the March quarter to its lowest since December quarter 2019, as imports for items such as rapid antigen tests more than offset rising exports of metal ores and coal.

The ABS expects the declining surplus to “detract 1.7 percentage points from the March quarter 2022 GDP quarterly movement”, although growth should still be positive due to strong mining profits (see above), rising inventories and very solid government and consumer spending.

Chewing the fat

Bits and bytes

πŸ‘¨β€πŸ‘©β€πŸ‘§β€πŸ‘¦ Albo unveiled his new front bench last night. View the list here.

πŸ‘©β€πŸ’» This is why the centralisation of data is incredibly dangerous: A cloud-based client management system for NDIS service providers was hacked, an event being described “like having the My Health Record on the dark web”.

πŸ™Š Looks like censorship, swims like censorship, and quacks like censorship… Australia’s unelected e-safety commissioner Julie Inman Grant told the World Economic Forum that “we are going to have to think about a recalibration of a whole range of human rights that are playing out online, you know, from freedom of speech to the freedom to be, you know, free from online violence”.

🏭 Bottomed out? China’s official manufacturing purchasing managers' index (PMI), which measures changes from the month prior with 50 equating to no change, rose to 49.6 in May, up from 47.4 in April. Non-manufacturing rose to 47.8 from 41.9 in April.

πŸ–ΌοΈ How very German of them: “Germany hands over looted artefacts, including 23 ancient pieces of jewellery, to Namibia – on loan.”

πŸ’‰ The Victorian government joined QLD, WA, SA, TAS and NSW in making the flu jab free of charge this winter.

πŸ—³οΈ The latest Guardian Essential poll found that “64% of respondents say an expanded crossbench would be positive because it would ensure a wider range of views were represented”.

πŸ€” Despite running for leader of the National Party on Monday (and losing), Barnaby Joyce claimed “I was transitioning out of the leadership and that was what I was going to do.”

πŸ“œ China’s government released its full Pacific position paper, which is “similar to the [leaked] draft communique but [has] no mention of free trade, joint policing and cybersecurity cooperation”.

🍁 Canada’s government “is proposing a new law that would freeze private ownership of all short-barrelled firearms… [it] would not ban the ownership of handguns outright - but would make it illegal to buy them”.

πŸ“‰ “Canadian economic growth slowed sharply in the first quarter, missing market expectations by a wide margin, as a decline in trade volumes offset robust advances in household purchases, residential real estate and business investment.”

πŸ“ˆ Inflation in France grew at its fastest rate since 1985 in May, rising 5.8% from a year ago “as surging energy and food costs continued to filter through to other goods and services”.

πŸ”₯ Eurozone inflation hit 8.1% in May, a fresh record high that will heap pressure on the European Central Bank, which has an annual inflation target of 2%, to belatedly act. It’s next due to meet on 9 June.