27 Apr 2018
Bumper U.S tech stock results push markets higher
Markets
- Local, Asian and most European equity markets finished higher this week, whilst US stocks were flat.
- Bucking the recent trend against tech stocks was Google-parent Alphabet which reported their strongest quarterly sales growth in almost 4 years, up 24% from a year earlier. Facebook and Amazon share prices also surged following strong quarterly results.
- Equity investors globally were nervous after US 10 year government bond yields broke through the 3% barrier on rising expectations for 4 rate hikes this year and a surge in government debt issuance following revenue shortfalls. Unnecessary tax cuts will do that to you.
- In local stock news, banks and diversified financial AMP continued to come under selling pressure following fallout from the Royal Commission. AMP’s CEO resigned last week and there are further calls for the Chairwoman and the rest of her board to go.
- The big 4 banks sold off during the week following revelations that Westpac’s lending controls were ineffective. Westpac has responded with a firm rebuke.
- Shares in building products supplier Boral fell after the company announced March quarter earnings were below expectations. Integration and execution the story here.
- Wesfarmers 3rd quarter sales came in below the previous quarter’s numbers but better than the same time last year. Weaker petrol volumes didn’t help, whilst Bunnings locally continued to perform strongly. Sales growth at Bunning’s UK continued to slide but with improved trading results.
- Resource stocks came under selling pressure following a fall in iron ore shipments in the 3rd quarter and the potential lifting of US sanctions on a key Russian aluminium producer.
Economics
- Australian March quarter inflation came in weaker than expected, taking the annual rate to 1.9%, which is below the RBA’s target band.
- The Australian banking regulator has lifted the cap on new lending to property investors it previously imposed on the banks. The regulator said it expects lenders to put in place restrictions that focus on a borrower’s debt to income ratio.
- US economic data improved, with manufacturing and existing home sales data higher, whilst US consumer confidence and new home sales came in above expectations.
- The US economy suffered a net loss of 140,000 private sector jobs in the 3rd quarter, the first such loss since early 2010. The unemployment rate held steady at 4.1%.
- European central bank President Draghi warned that rising protectionism poses a risk to the Eurozone economy and emphasised that the ECB would be cautious about removing its large stimulus program
- Japanese manufacturing data improved with output and domestic demand picking up in April.
Politics
- North Korea’s leader indicated that the country has suspended further nuclear tests as part of the important steps for nuclear disarmament. In reply, the US indicated it won’t be making any concessions on sanctions until North Korea has substantially dismantled its nuclear program.
- The US has until the 12th May to decide whether it will abandon a nuclear deal with Iran and impose new sanctions against the country. New sanctions will inevitably target oil exports, thus putting further upward pressure on oil prices.
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