20 May 2016
Markets
- The US equity market came under pressure as US central bank meeting minutes showed an intention to raise rates soon rather than later, so long as the economy continued to strengthen.
- This also placed pressure on global equity markets more broadly, given expectations of only one rate rise this year.
- The upwards pressure on the US dollar pushed commodity prices lower thus hurting Australian resource stocks.
- Shares of Apple rose after news confirmed that Warren Buffett’s Berkshire Hathaway had taken a US$1bn stake in the tech giant. In the same trade, Buffett bought IBM, VISA and Bank of New York, whilst selling MasterCard and Walmart.
- In local stock news, Westpac announced they would be issuing a new hybrid security, Capital Notes 4, to replace the maturity Westpac TPS securities. The new notes will have a 5.5 year term to the first call date and have a very different structure to the TPS securities.
- Westfield Corporation (overseas centres) provided its third quarter update with sales growth moderating while its development starts remain on track. Occupancy improved across the portfolio whilst occupancy costs fell. Westfield expects to commence US$1bn of projects in 2016.
- IOOF Holdings announced that they expect underlying net profit after tax for this financial year to be broadly in line with last year. Revenues have fallen in light of equity market weakness, but gross margins and operating costs are expected to be relatively unchanged.
Economics
- The Reserve Bank of Australia confirmed that they considered keeping the cash rate on hold at the last meeting but were swayed by the rising Australian dollar and signs of lasting weak inflation. They felt there was broad-based softness in prices and labour costs which could persist.
- Australian consumer inflation expectations for the year ahead fell to 3.2%, the weakest monthly reading since June 2015, somewhat validating the central bank’s concerns.
- The Australian unemployment rate held at a 2.5 year low in April, coming in at 5.7%. The number of people in work increased by nearly 11,000 from March, when over 25,000 additional jobs were created.
- US inflation rose in April, the biggest monthly increase in more than three years, driven by higher petrol prices. Core prices, which exclude volatile items, are 2.1% higher on the same time last year.
- US retail sales were up 1.3% in April from the previous month, the largest gain in over a year and well above expectations. Cars, gas and online shopping were the biggest drivers of the gain.
- US consumer sentiment rose in May, with the key reading coming in well above expectations. This was the highest reading since April 2015.
- Chinese economic data was lower across the board with industrial production, retail sales and fixed asset investment all falling. April loan data was also considerable lower, with new loans halving and government assistance loans falling by 70%.
Politics
- Recent polls on the UK’s vote to remain in or exit the European Union show a jump in the “remain” camp, with 55% expressing a desire to remain and 37% in the “leave” camp. This is the highest level of EU support in three months.
- Early indications show that a crashed EgyptAir plane that had gone missing en route from Paris to Cairo was most likely a terrorist attack.
- The Australian Federal Police have raided Labor Party offices in Melbourne over the alleged leak of documents from the National Broadband Network (NBN). The raids targeted work and home addresses. Labor have slammed the raids. The NBN are assisting in the ongoing investigation.
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