30 Jan 2015
Markets
- The Australian share market finished higher this week buoyed by confirmation of the European Central Bank’s quantitative easing program and talk the RBA may be close to cutting rates further.
- The US equity market fell on concerns regarding the economic effects of a falling oil price and the US Central Bank raising rates sooner than expected. Disappointing earnings announcements from some blue-chip companies didn’t assist.
- Asian markets were mixed, whilst European stocks fell on concerns regarding the Greek election result, escalation of the Russia/Ukraine conflict and the downgrading of Russian debt to junk status by credit rating agency S&P.
- In local stock news, ResMed announced strong results for the December quarter. Revenue was up 10% and net income was up 5% on the previous corresponding period. Australian dollar falls continued to assist. The market reacted favourably to the announcement.
- Woodside Petroleum and its partners have been accused of holding back natural gas shipments to China as a negotiating tactic to raise the price of a $25bn contract signed in 2002 guaranteeing 25 years of cheap energy (prices which are less than half the current prices, which are already low).
- Fortescue Metals shares rallied after the miner maintained its full year production guidance after a strong performance in the December quarter. Fortescue mined 43.6m tonnes, a 36% increase on the previous corresponding period. Total ore shipped was 41.1m tonnes, a 47% increase.
- The Australian dollar fell sharply this week hitting a low of 77.20 cents against the US dollar as speculation rises the RBA will be next to cut rates after Canada (another resource rich country) did so last week.
Economics
- Initial unemployment claims in the US fell to their lowest level since 2000. Economists had expected a much more modest decline.
- US home prices rose 4.7% in November on the same time the previous year, which was slightly higher than the 4.6% increase seen in October. However, these numbers are well below double-digit home price increases seen in the last few years.
- US consumer confidence rose strongly in January with a key reading well above expectations and at the highest level since August 2007.
Politics
- The Greek elections went as expected with the left-wing Syriza party winning 149 out of a possible 300 seats in parliament. They were joined in coalition by the Independent Greeks. Alex Tsipras, the 40-year old leader of Syriza, was sworn in as the youngest Greek PM in 150 years. They will be keen to re-negotiate the terms of their bailout with Eurozone officials – debt write-off and debt-maturity extension requests. Removal from the Eurozone is a possibility, but unlikely at this stage.
- Prime Minister Tony Abbott has apparently been put on notice by his senior ministers following his gaffe in awarding a knighthood to Prince Philip on Australia Day without consultation. An online bookmaker says PM Abbott is now odds on to face a challenge this term, with odds that his leadership will be tested shortening from $4 on December 2 to $1.65 on January 29.
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