22 Apr 2016
Markets
- Equity markets locally and globally pushed higher on the back of rising commodity prices and better economic data out of China.
- The US market pushed through new highs, levels not seen since December last year, with the market buoyed by a falling US dollar, slower than projected US interest rate rises, and reasonable results out of reporting season so far.
- In local stock news, Telstra sold down their stake in Chinese car sale website Autohome receiving $2.1bn, booking a gain of $1.8bn on their investment. Telstra will retain a 6.5% stake. Share buy-backs or increased dividends are on the agenda.
- Rio Tinto and BHP both provided updates to the market, with Rio reporting decreased iron ore output for the quarter due to seasonal factors and weather, but maintaining their guidance for this financial year. BHP also reported lower iron ore output due to weather, but also due to accelerated rail maintenance. Cost guidance remained unchanged at US$15 per tonne. Importantly, petroleum and copper numbers were strong for BHP.
- Sydney Airports released its March traffic data with annual international passenger growth running well ahead of long term trends. Foreign inbound traffic grew 10%, led by strong growth in Japanese nationals. Australian outbound grew strongly due to the earlier Easter holiday period.
- Wesfarmers reported strong first quarter sales results, with Bunnings and Kmart well ahead of expectations, whilst Target came in below (but still grew sales) and Coles in line with expectations. Total retail sales for the group grew 5.6% in the quarter.
- The Australian dollar pushed higher this week pushing through 78c against the US dollar before settling a little lower.
- Attempts by some of the world’s biggest oil producers to freeze output ended without a deal after Saudi Arabia insisted Iran should be part of any agreement. The Iranians don’t want to be part of any deal until they can get their production up to where it was pre-sanctions.
Economics
- Foreign purchases of Australian residential property fell to a 2.5 year low in the first quarter as banks tightened lending restrictions to offshore buyers. Foreign buyers of new homes accounted for 11.8% of new property sales, down from the peak of 16.8% in September 2014. The share of foreign buyers in new property markets in Qld rose for the third straight quarter to nearly 22%.
- As expected, the European Central Bank left interest rates unchanged and didn’t unveil any additional stimulus measures. ECB Chair Mario Draghi left open the possibility of future measures.
- US data was mixed with industrial production and consumer sentiment data coming in lower than market expectations. The lower US dollar has resulted in strength in the New York manufacturing sector with data the highest since early 2015.
- China’s headline economic growth matched expectations, coming in at 6.7%. The result was similar to last quarter’s number and lies comfortably within the government’s target range.
- Other Chinese data was also positive including industrial production, retail sales and fixed asset investment, which all topped expectations.
Politics
- Germany’s finance minister has warned Britain that they would be a tough negotiator if the UK votes to leave the European Union. The minister also confirmed that Germany would not readily agree to an easy trading relationship with Britain if they were to exit. A British exit is not a good idea on any basis.
- The Federal Parliament rejected a bill pushed by PM Turnbull to curb labour unions’ power, with the defeat triggering new elections on the PM’s threat to invoke an election if lawmakers didn’t pass the bill. The Governor General is expected to dissolve both houses of parliament with a likely election date of 2 July.
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