NEWS + VIEWS – 07/11/2025
MARKETS
Markets are entering the Santa Rally season when shares tend to rise from November into the New Year. Of course, this is a pattern only with no assurances. The old saying ‘sell in May and go away’ was contrary to the solid rises over that period this year. Markets received a boost from the meeting between Trump and Xi Jinping when trade tensions eased (at least for the time being).
Domestically, the recent inflation reading was not good (see chart below) putting further interest rate cuts this year on ice. In fact, we may have seen the last easing in this cycle. Annual underlying inflation was 3.0% to the September quarter, up from 2.7% in June. The reading is at the top of the Reserve Bank’s target range but heading in the wrong direction. Energy costs, government spending and anaemic productivity are key reasons for the concerning trend.
Source: Australian Bureau of Statistics
THOUGHTS FROM EUROPE
I spent September in Europe and thought some observations might be interesting. I do notice things ‘economic’ when travelling, which is probably an accusation as well as an observation.
September is supposed to be the ‘shoulder’ season. Perhaps being in tourist spots it appears naturally busy but there didn’t seem to be any capacity. We were advised by one hotel that we stayed at in Paris early in the month that it was booked out into October, which apparently is very unusual.
One sympathises for some European folk who rebel against the crowds in cities like Barcelona and Venice. On the other hand, they need the business.
The Chinese tourists are back. I can recall my observation in 2023 that there were few Chinese tourists due to the impact of COVID. The Chinese are now swelling the numbers. Interestingly, there were some Americans but didn’t seem as numerous as when we were last in Europe. The US$ is lower against the Euro so it would seem exchange rates are impacting travel plans.
The AU$ is not buying much. Prices in Euros are high but when you apply the exchange rate, things get very expensive. We spent two weeks in Switzerland and the A$ covers even less there than other Euro countries.
Eating out was expensive as usual but particularly so in Switzerland. The quality of the food was patchy in all the countries we visited (France, Switzerland, Austria and Germany), which is a bit surprising as supermarket prices are reasonable (more expensive than Australia but not reflecting the restaurant ‘gap’). Also, the quality of food in supermarkets was OK. My suspicion is that the cost of staff is very high, which pushes up the restaurant costs. In addition, the swarms of tourists may be the reason for the disappointing quality of restaurant food.
Petrol prices are well over A$3 per litre.
The comparison of Switzerland to the other countries we visited was interesting, particularly the spectacular scenery. Swiss trains lived up to their excellent reputation and are superior to other countries (even Germany). The quality of the Swiss accommodation also took a step up. They take efficiency and cleanliness very seriously in that country.
Why are Switzerland and Japan so efficient? Neither have significant natural resources. One wonders what it is in a country’s culture that makes the difference.
Overall, European tourism is very healthy. The peak season appears to be expanding into shoulder seasons to cope with numbers. While the weaker A$ is making travel more financially painful, the scenery is outstanding as is the history and experiences with locals and fellow travellers.
COMPANY NEWS
CSL weakens guidance again
CSL downgraded its profit guidance again to 4 - 7% (down from 7 - 10%). The main culprit is weaker sales in the Seqirus vaccine business due to the US part of the business lagging. The guidance didn’t reference the Kennedy influence on vaccine take up but it is most likely a factor. CSL also put the demerger of Seqirus, which makes up less than 15% of the company’s earnings, on hold.
The core Behring plasma business is still looking solid however, operating in a highly consolidated market as an oligopoly.
CSL’s share price fell heavily on the day of the announcement but then recovered around 7% during the following two days. According to Bloomberg, brokers are estimating price/earnings is around 16.6 times, which is low for the health sector although it is reflecting concerns around CSL’s growth.
Analysts are divided with some exiting the stock while others see the share price fall as an opportunity. CSL needs an extended period of meeting or even exceeding profit guidance to restore confidence in management.
Gerard O’Shaughnessy
P 0423 771 330
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