5 Feb 2016
Markets
- Sharp intraday swings escalated in markets this week, troubling some analysts (including us).
- Increasing volatility in currencies and commodities is causing equities to be more volatile than usual.
- Australia and the US fell, as did Europe, whilst Asia finished mixed, with Japan and India down and China up.
- Some Australian companies reported downgrades to earnings. The market didn’t take the news to kindly, punishing the stocks. Companies included Ansell, Downer, and Tabcorp. Macquarie also sold off even though their report seemed reasonable.
- US companies reported mostly mixed fourth quarter results.
- In local stock news, Computershare confirmed that it had been appointed preferred supplier in the tender process to undertake the mortgage servicing activities of a government body, established in 2010 to administer the closed mortgage books of failed/nationalised banks. The company also announced another acquisition in the US, which will give them greater scale.
- National Australian Bank’s UK bank spinoff, CYBG, begin trading on the ASX this week. The final price was set towards the lower end of the guided range. The market cap of the company will be $3.2bn, with NAB having raised gross proceeds of $700-800m from the spinoff.
- Smaller Australian iron ore players Atlas Iron and BC Iron disclosed lower extraction costs at $55-$59 per tonne. Troublesome given the current price of iron ore. The larger players (BHP, Rio, Fortescue) have extraction costs in the $15-$20 range.
- Oil prices bounced as rumours swirled that OPEC (ie. the Saudis) were willing to consider production cuts in order to reduce supply in the market and help push the oil price higher. The bounce followed sharp falls in oil prices earlier in the week.
Economics
- The Reserve Bank of Australia left the cash rate unchanged at 2%, showing comfort in current settings. Their comments were reasonably bullish on how the economy performed in 2015, suggesting they’ve probably come to the end of their rate cutting cycle.
- Australian private sector credit growth came in below expectations for 2015, but increased on last year’s number.
- Manufacturing activity in Australia slowed slightly in January but still recorded an expansion for the 7th straight month, the longest straight expansion in five years. The benefits of a lower currency.
- Australian building approvals jumped in December following a steep fall in November. The December result was much strong than expected. Over the 12 months, approvals fell 2.5%, again beating expectations of a much larger fall.
- The Japanese central bank pushed their cash rate into negative territory in order to further stimulate the economy, boost inflation, and encourage investors to invest in growth assets.
- The US economy grew at a slightly slower than expected pace in the December quarter. Economic growth for 2015 came in at a reasonable, but not spectacular, 2.4%.
- A key US jobs report showed a larger than expected 205,000 private sector jobs were added in January. December’s bumper number was also revised higher.
- China’s official manufacturing gauge showed continued signs of weakness, marking the 6th straight month of contraction. News sources forgot to mention how good services data has been (ie. the positive news).
Politics
- Reasonably quiet on the political front (which is probably a good thing) in terms of news of substance. Donald Trump lost the Iowa primaries (hardly surprising) and PM Malcolm Turnbull threatened a double dissolution if the opposition failed to support a watchdog aimed at stamping out union corruption.
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