22 Jan 2016
Markets
- The Australian share market finished up for the week, helped by a strong rally in resource stocks.
- Markets globally had a reasonable week, in contrast to the ugly start to the year, as US and Chinese economic data met expectations.
- BHP announced it expects to recognise impairment charge of US$4.9bn against the carrying value of its onshore US assets (shale). The impairment will reduce onshore US net operating assets to US$16bn. BHP will also reduce the number of operated rigs in this business from seven to five.
- Woolworths announced they intend to exit their Masters hardware business as a review indicated it would take many years before the business was profitable. Woolworths will buy out their joint-venture partner, Lowe’s, in order to give them flexibility in how they dispose of the business. The decision will free up cashflow to be used in other parts of their business.
- Wesfarmers confirmed the agreement to buy the UK’s Home Retail Group’s hardware division Homebase for $705m. The new UK business will eventually be rebranded Bunnings. Homebase is the second largest home improvement and garden retailer in the UK and Ireland.
- National Australia Bank announced further details on the demerger and subsequent IPO of their UK business. NAB shareholders will own 75% of the new shares in the separately listed UK business, which will be listed on the Australian and London stock exchanges. Pricing for the IPO, whilst not confirmed, will likely be somewhat attractive.
- Rio Tinto shipped record volumes of iron ore again in 2015 as the world’s second largest iron ore exporter put the finishing touches on a massive expansion of its Australian mining operations.
- Sydney Airport announced that international passenger traffic in December increased 8.6% compared to the previous December. Domestic passenger traffic was also strong, the strongest result since November 2015. Chinese inbound traffic grew at 31%.
- Oil prices fell to their lowest level in 12 years. Prices continue to be driven by demand concerns as oppose to actual demand falls. The news of Iran oil fields coming back on line didn’t assist.
Economics
- The number of Australian housing finance approvals rose in November, a little stronger than expected. Investor activity has clearly slowed in line with the intentions of regulators. Most of the owner occupier approvals for the month came from refinancing and new construction.
- US inflation fell in December, with prices rising just 0.7% for the full year, driven lower by falling oil prices. Excluding volatile food and energy prices, prices were up slightly for the month and up 2.1% for the year.
- European Central Bank head Mario Draghi said the bank could expand its stimulus efforts as soon as the bank’s next meeting. He also said there was no limit to measures the bank might take to boost the economy. Markets liked his comments.
- The Chinese central bank said they would start implementing a reserve requirement on some banks involved in the offshore Chinese currency market. The move appears to be an attempt to stem currency speculation and the outflow of currency from the economy.
- Chinese economic data was released with the economy growing at 6.8% in the fourth quarter of 2015 and 6.9% for all of 2015. This was the slowest annual pace of growth in 25 years, but it is still a very high rate of growth on a much bigger economy.
Politics
- An international energy agency confirmed that Iran had done what was necessary in order for sanctions to be rescinded. Iran claims it can increase production and exports by 500,000 barrels a day immediately and reach 3.4m barrels a day with seven months. The US then issued new sanctions over Iran’s ballistic missile testing.
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