29 Apr 2016
Markets
- Equity markets had a mixed week before the lack of additional Japanese central bank stimulus measures pushed markets lower.
- US tech stocks (ex-Facebook) disappointed during reporting season with underwhelming results from Google, Microsoft, Twitter and Apple.
- However, 76% of US companies' reporting earnings so far this season have beat market expectations, coming in above the longer term average of 66%.
- In local stock news, Santos reported a solid first quarter result with production up 11% and sales revenue coming in better than market expectations. Capital spending came in below target, with production costs down below $12 per barrel. Management maintained guidance across the board.
- Rio Tinto is seeking to buy back $1.9bn of shorter term debt in order to cut its debt levels and extend the maturity profile of its debt. The debt buyback will see short term debt reducing by 16% and total debt reduction of 6%.
- Westpac has followed ANZ and CBA in restricting lending to foreign buyers of Australian property. Westpac will refuse all mortgage applications from non-residents, temporary visa holders living overseas, as well as those with foreign self-employed income.
- ResMed’s share price fell after delivering a softer than expected third quarter update. The company’s very impressive margins slipped from 58.5% to 57.3%... Fair to say the market was a little overly critical.
- The Australian dollar fell this week as inflation came in sharply lower leading many to believe that the reading will force the RBA to cut interest rates at their meeting next week.
Economics
- Australian inflation slipped 0.2% in the March quarter, bringing the annual rate down to 1.3%, which is well below the RBA’s 2-3% target. The negative quarterly number was the first since 2008. Driving the reading was a 10% decline in petrol prices and a 10% decline in fruit prices. This was partially offset by rises in education and healthcare costs.
- There have now been four consecutive months with over 500,000 homes sold in the US, the first time since 2008. New US home sales were down in March from February levels, but previous months were revised higher. However, March sales were up 5.4% on the same time last year.
- The US central bank left rates unchanged and provided little indication when it would deliver another rate rise.
- The European Central Bank left policy unchanged as expected. No meaningful changes were communicated. They noted that financial conditions had improved, but that global uncertainties persist.
- The Japanese central bank left its main policy unchanged and brushed aside calls for more stimulus, which quickly sent the Yen up and Japanese stocks down.
Politics
- The euro area and the IMF have signalled that a deal on Greece’s next bailout instalment is within reach. The sticking point is that the Greek government must approve “contingency measures” to ensure a 2018 budget surplus is met. Greek law doesn’t allow for such measures to be legislated.
- Donald Trump and Hillary Clinton were big winners across the north east of America. Trump’s margin of victory surpassed expectations. Trump now has nearly double the lead over his nearest opponent in the Republican race.
- In light of the upcoming Federal Budget announcement, betting agencies are now taking bets on things like “Budget Speech Length”, “First Catch Phrase Used”, “Most Used Buzzword”, “Colour of Scott Morrison’s Tie”, “Length of Post Speech Applause”, and my personal favourite, “Scott Morrison Forehead Sweat Beads/Drops”.
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