9 Jan 2015
Markets
- Equity markets globally moved in lock-step with each other falling earlier in the week (potential Greek exit from the Eurozone) before rising later in the week (potential European Central Bank stimulus and the US Central Bank in no rush to raise rates) to finish flat.
- European share markets fell on concerns of a Greek exit before rallying from expectations of forthcoming stimulus from the European Central Bank as they look certain to join the quantitative easing club (US first, then Japan).
- In local stock news, Qantas shares continued to rise, hitting four year highs this week. Jet fuel, which trades at a premium to the oil price, is now more than a third lower than it was a year ago. The falling oil price and Australian dollar along with benefits reaped from the transformation strategy are helping.
- Fortescue Metals Group announced an increase in its mineral resource base of more than 300Mt, further adding to global supply.
- Iron ore continued its rise from last week following the announcement of new stimulus by the Chinese government and a reduction in Chinese port stockpiles.
- The Australian dollar continues to fall hitting 5.5 year lows at US80.53c. Mainly a result of the US dollar rising, which is continuing to put downward pressure on the oil price (also hitting 5.5 year lows) in addition to the supply/demand imbalance.
Economics
- Home prices in the capital cities rose by close to 1% in December. Overall home prices were up 7.9% in 2014, but the growth rate is slowing with the most noticeable reduction coming from auction clearance rates in Sydney and Melbourne.
- November 2014 building approvals rose by 6%. The rise was driven by the apartments segment, up 26%, whilst the detached house and townhouse segments (higher materials usage) declined by 4%.
- A key US manufacturing index eased in December, well below market estimates. Construction spending also fell in November, below forecasts for a gain, as did a key indicator for the non-manufacturing sector.
- The US economy added 241,000 private sector jobs in December, below expectations for 250,000 but still a very strong number. November job gains were revised upwards and unemployment claims fell to a 14 year low.
- Minutes of the last US Central Bank (the Fed) meeting were released indicating that the Fed would be patient in lifting rates. With energy costs falling and little pressure from wage inflation, the Fed doesn’t need to be in a rush to raise rates. The second half of 2015 may now seem more likely.
- Chinese consumer sentiment improved in December, regaining some ground lost since its three year low was breached in October. Overall, consumer sentiment fell 10% in 2014.
Politics
- The Germany/Greece tensions were back on the agenda this week ahead of Greece’s parliamentary elections this month. A published report stated that Angela Merkel and the German government were more than happy for Greece to exit the Eurozone. However, a later report confirmed that Germany would open lines of communication with any new Greek government with regard to ongoing financial support… The Greek’s aren’t looking for ‘financial support’, they want full debt forgiveness!
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