24 Jun 2016
Politics
- The British voted to leave the European Union by 52/48. Whilst this now plays out over an approximate two year timeframe, PM Cameron will likely resign, new early elections may be called, and Scotland will most likely hold another referendum to leave Britain given their preference for remaining in the EU.
- The PM will have to decide when to trigger Article 50 of the Lisbon Treaty, which would give the Brits two years to negotiate its withdrawal. Once Article 50 has been triggered, a country cannot re-join without the consent of all member states. Fair to say that the Brits will be slow in triggering the Article.
- Democrats in US parliament have staged a “sit-in” in attempts to force through gun control legislation. They took the floor and refused to remove themselves from the stage until there was agreement that something needed to be done. Small victory ensued, but unlikely anything will actually be done.
Markets
- Markets fell sharply after the British voted to leave European Union (EU), 52% to 48%.
- The result came as somewhat of shock given market movements in the last couple of days. We are struggling to remember the last time markets got something this wrong in the lead-up to a planned event.
- Markets had largely priced in Britain voting to remain in the EU, so the coming days won’t be pleasant.
- In somewhat ironic (amusing) news, the Chinese have banned the sales of iPhone 6 and 6s models on the basis that it infringes a patent by copying the look of a Chinese phone…
- Volkswagen has agreed to pay more than $10bn to settle claims from US owners of 500,000 diesel powered vehicles affected by the emissions-cheating scandal.
- In local stock news, Sydney Airport announced that traffic continued to perform strongly during May, growing 7.8%. The result was driven by a 12.1% increase in seat capacity (i.e. more planes coming through). Strong foreign demand was the main driver, with Chinese nationals alone increasing by 10,000.
- Metcash swung back to profit reporting a reasonable result, sighting a lift in underlying profit and revenue, and that an improved balance sheet will likely lead to dividend reinstatement in 2017. Shares fell sharply as food and grocery earnings plunged on price cutting and as management warned of challenging conditions ahead.
- BHP has outlined the path for its coal business to improve returns by unlocking productivity, reducing costs and removing uneconomic capacity. The coal business has already delivered over US$3bn of productivity gains since 2012, and is targeting another US$600m.
- Wesfarmers provided an update announcing continued strong volume growth. However, food deflation has accelerated due to increased supply. Coles Online saw sales growth of 25%.
- SEEK has paid $182m to completely buy out its Brazil business and up its stake in its Asian venture. The transactions will increase earnings from 2017. The company also reaffirmed its 2016 guidance.
- The Australian dollar plunged 3 cents today against the US dollar on confirmation of Britain’s exit from the EU. This reversed a 2 cent rise earlier in the week on positive sentiment to riskier assets as commodity prices stabilised and rose in some instances.
Economics
- Australian consumer confidence is at the highest level since November 2013. From an economy perspective, hopefully this translates into increased household spending in the months ahead.
- US new home sales fell 6% in May. However, sales were still up 9% on the same time last year.
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