17 Apr 2015
Markets
- The Australian share market struggled this week in light of the weakness in China and declining iron ore prices.
- Corporate and M&A activity pushed the US market higher with conglomerate GE announcing asset sales to simplify their business and to initiate a stock buy-back. This brings the total of US buy-backs announced this year to $218bn.
- European equities edged to 15 year highs as central bank stimulus trumped signs of a slowdown in the Chinese economy. However, the market gave back some of those gains on renewed fears regarding Greece’s solvency.
- In local stock news, toll operator Transurban has posted a healthy lift in third quarter revenues. Toll revenue rose close to 70% in the March quarter, aided by taking full control of Sydney’s Cross City Tunnel and its acquisition of Queensland Motorways. Excluding the contribution from acquisitions, toll revenue rose a strong 10% following strong traffic growth.
- Toll Holdings moved a step closer to being taken over by Japan Post in the $6.5bn deal. Japan’s Fair Trade Commission has no plans to object to the planned takeover. The takeover has already passed Australian regulatory hurdles.
- Suncorp CEO Patrick Snowball will leave the insurer in October after a six year stint leading the company. Well regarded, GPT Property CEO Michael Cameron will take over.
- Oil prices rose on expectations that production will soon plateau and amid uncertainty about Iranian nuclear negotiations and ongoing tensions in Yemen.
- Credit rating agency S&P have put out their expectations for the iron ore price for the next three years with revisions of $15 per tonne on their previous estimates. They have 2015, 2016, and 2017 at $45, $50 and $55 respectively.
Economics
- The Australian economy is showing some tentative signs of improvement with a key monthly business survey indicating business confidence and business conditions had begun to rise, though off very low bases.
- Australia’s unemployment rate dropped more than expected in March, declining from near 12 year highs to 6.1%. Expectations had been for the rate to hold steady. The number of people employed rose by 37,700 in the month versus expectations of a 15,000 rise.
- Home loans for owner occupied housing granted in February rose by 1.2%. The data also showed a strong 5.4% gain in the purchase of new dwellings and an increase in owner occupied loans versus investment loans.
- Chinese exports collapsed in March adding to worries about the slowing economy. China’s exports fell 14.6% in March, which was an unexpected fall and a further sign of weakness. Imports also fell sharply.
- China’s economy grew at its slowest pace in six years in the first quarter as the latest round of data added to concerns about a loss of momentum. The economy grew at 7% in the first quarter, in line with expectations, but lower than the previous quarter.
Politics
- Sovereign risk has crept into corporate Australia with the Victorian government threatening to legislate against compensation payments for projects that are closed down by incoming governments. The state Labor government shut down the East West Link once coming into power. Lend Lease, and associated parties, were seeking cost recovery and compensation. The government was only willing to pay cost recovery, and threatening to legislate if the parties failed to drop the compensation they were seeking. Foreign companies are now on notice that sovereign risk now exists in Australia.
- Reports have emerged that the Greek government had asked the IMF to delay a May 1st debt payment and that the IMF has rebuffed the request.
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