27 May 2016
Markets
- Markets locally were buoyed by strong gains from global equity markets on the back of rising oil prices and strong positive momentum on US economic data.
- In overseas takeover news, German chemical giant Bayer has made an official offer to acquire the US based giant Monsanto for $62bn in an all cash deal.
- In local stock news, Sydney Airport saw over 10% growth in international traffic in April. Australians travelling abroad grew at 10% to destinations such as the USA, Indonesia, NZ, HK and China. International passenger growth grew at an annual pace of 6.7%. The domestic market also grew strongly.
- Westpac announced they were lowering the size of the deposit they require from property investors, reversing some of last year’s crackdown. The maximum LVR for Westpac and St George property investment loans is now 90%. This comes as growth in new investment loans has fallen well below the regulators’ 10% a year growth.
- CSL has confirmed that the US Food & Drug Administration has approved the company’s new 4-strain flu vaccine for the US market. US regulators have also approved CSL’s replacement therapy for the treatment of haemophilia A. Two solid wins for the company.
- Wesfarmers announced a range of factors will impact their 2016 FY result. They will take significant one-off write downs/impairments on Target ($1-1.5bn) and a non-cash impairment of $600-850m on their coal assets.
- The takeover of Asciano faces a fresh delay after the competition regulator flagged concerns over the vertical integration of one of the combined divisions. The ACCC’s final decision on the drawn out takeover will now be delayed until 21 July. If completed, the transaction will have stretched to more than a year. Not a good look from a national “open for business” perspective.
- Oil prices pushed higher, trading above US$50 a barrel for the first time in more than six months as US stockpiles declined more than expected. Oil has now surged almost 80% since hitting a 12 year low earlier this year on signs the global oversupply will ease as Nigerian and US production falls.
Economics
- Australian wages growth rose by at anaemic pace in the first quarter, with annual growth decelerating to 2.1%. Private sector wages grew even slower. Wages are now growing at the lowest annual pace on record.
- The amount of construction work in Australian fell to 2.6% in the March quarter which was below expectations. Engineering work done, which includes mines, roads, bridges, was down 4.2% for the quarter, and new capital expenditure (buildings and equipment) declined 5.2%. This is a concerning set of data for the economy on a forward looking basis.
- Existing US home sales were up 1.7% in April from March levels, coming in above expectations. The median sale price was up 6.3% year on year to $232,500.
- New US home sales rose by 16.6% in April from the previous month to an annual rate of 619,000. Sales are now at their highest levels in eight years.
- US central bank members echoed comments seen in the minutes released last week that the economy is close to being strong enough to warrant an increase in rates, and that the market is underestimating the prospect for higher rates.
- The central bank of Japan is staying the course regarding rhetoric, repeating their capacity and willingness to ease further if necessary. In contrast, the Japanese Yen continues to climb as markets call the central bank’s bluff on further easing.
Politics
- Recent polls on Britain’s upcoming vote on whether to leave the European Union showed increased support for those in favour of remaining. Maybe the intelligent debate has begun.
- Greek lawmakers approved additional austerity measures to unlock more emergency loans from the euro area, ahead of a meeting of finance ministers. European creditors remain at loggerheads with the IMF about how much debt relief Greece will get.
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