US Inflation Slows, But Don't Get Too Excited

Good Morning,

The nearly 60,000 Covid-related deaths China reported for the first five weeks of its current outbreak, the largest the world has ever seen, may underestimate the true toll by hundreds of thousands of fatalities, experts say. Kiwibank chief economist Jarrod Kerr states that the latest inflation figures from the United States were "playing out just as hoped", boosting hopes that price rises may also be near a peak in New Zealand, while Russia and Belarus begin joint military exercises, sparking fear in Kyiv of a new ground offensive.

Let's jump in.

Before The Bell

Markets

• Investors cheering a slowdown in US inflation are failing to account for rising credit card debt, falling house prices and higher borrowing costs which will bring the US economy to a halt and force the Federal Reserve to reverse its monetary policy course this year (AFR)

• Australian shares advanced 0.8 per cent on Monday to the highest level in nine months despite the ASX's iron ore producers suffering from a renewed crackdown by China on commodity price strength (AFR)

• While inflation in the US appears to have peaked, aggressive policy tightening by the Federal Reserve and other central banks risks pushing the global economy into a recession that will hurt corporate profits. The World Bank last week added to the gloomy outlook, warning of "one of the sharpest slowdowns we have seen in the past five decades" (BBG)

• The UK's export-oriented FTSE 100 hovered near 4-1/2 year highs on Monday, underpinned by banks and consumer staples, while investors looked ahead to a week dotted with the release of key domestic economic data, including inflation point (RT)

News Summary

• China's abrupt pivot from Covid Zero in early December unleashed a surge of omicron infections and led to 59,938 virus-related deaths in the nation's hospitals, though experts say it is still likely to be an underestimate given the enormous scale of the outbreak and the mortality rates seen at the height of omicron waves in other countries (BBG)

• Kiwibank chief economist Jarrod Kerr states that the latest inflation figures from the United States were "playing out just as hoped", boosting hopes that price rises may also be near a peak in New Zealand (Stuff)

• Russia and Belarus began joint military exercises on Monday, which have triggered fears in Kyiv and the West that Moscow could use its ally to launch a new ground offensive in Ukraine (RT)

• Nick Kyrgios is "devastated" after being forced to withdraw from the Australian Open on the eve of his first match (9News)

• Italy's most-wanted mafia boss Matteo Messina Denaro has been arrested after 30 years on the run (Stuff)

• India bought a record amount of Russian oil last month, with the country importing a whopping 33 times more than a year earlier (BBG)

Deal Flow

Investments / M&A

• Industry superannuation giant Rest Super is set to call time on its investment in NSW's second-biggest electricity distribution company, Endeavour Energy. Rest has hired investment bank Barrenjoey to shop the stake to rival superannuation funds and other potential buyers, fuelling expectations of a $1 billion AUD-plus deal (AFR)

• British chemical firm Ineos is nearing a deal to buy Swiss chemical firm Sika's assets that are being sold to appease antitrust regulators. The deal is thought to value the assets at $750m (USD) (RT)

• Public relations firm Sefiani has been acquired by global communications agency Clarity in the latter's first move into the Asia Pacific region (AFR)

• The Takeover panel for the Nitro Software case has been formed, and submissions are expected from all three parties this week (AFR)

VC & Fundraising

• A pair of former fund managers from KKR and British International Investment aims to raise as much as $250m (USD) to invest in technology-focused startups in India for their new VC firm Fractal Growth Partners (BBG)

• The New Zealand Government has upgraded its funding for a Wisewool project aimed at increasing the market potential of woollen knops - the small, light, fluffy balls used as a filler ingredient. The project will now receive $790,000 from the Ministry for Primary Industries Sustainable Food and Fibre Futures fund, up from $450,000 announced in April last year as being awarded to Allwool. (NBR)

Equity Raises

• Bain Capital has fired the starter's pistol on its plan to return Virgin Australia to the ASX, riding a "revenge travel" pandemic rebound that has pushed the share price of market leader Qantas 45 per cent higher in the past six months. Bain said on Monday it would "shortly seek advice" on an initial public offering, less than three years after it bought Virgin from administrator Deloitte (AFR)

• Argentinian lithium carbonate developer Argosy Minerals could be one of the first equity raisings out of the gates for 2023, with investors already booked in for a round of meetings (AFR)

Daily Picks

• Authors from the Australian Financial Review have composed an article describing the difficulties of investing in a deeply divided world. Check it out here.

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