20 Feb 2015
Markets
- The Australian stock market pushed through levels not seen since May 2008 spurred by reasonably good results from company reporting season, M&A activity and expectations of another RBA rate cut in March.
- Japanese equities followed suit hitting levels not seen since July 2007, following news the country pulled out of recession in the final months of 2014, and assisted by strong leads from US equity markets which hit all-time highs.
- European stocks climbed to seven year highs and Asian stocks also rose as investors bet that Greece will eventually hammer out a new financing deal and avoid exiting the Eurozone.
- In local stock news, ANZ bank posted a solid first quarter cash profit of $1.79bn, slightly higher than a year earlier. The stock fell as the market wasn’t impressed with the result.
- The board of Toll Group has unanimously recommended shareholders accept a $6.5bn takeover bid from Japan Post, as the Tokyo based company seeks to expand its international business. The offer is $9.04 per share plus the 13c interim dividend, equating to near 50% premium to the last trading price of the shares.
- Crown Resorts shares rose as investors took a liking to their first half results. Profit was lower due to the weaker environment in Macau (ban on smoking, a Chinese government clampdown on corruption), but they beat market expectations as their Macau venture was one of the best performers and the Australian business performed strongly.
- Wesfarmers reported a fall in half yearly profit but a rise in earnings. Net profit came in at $1.376bn whilst revenue rose. The lower profit was a result of sales of its insurance division and a stake in an industrial and medical gases business.
- The Australian dollar maintained its stubbornness, continuing to trade at the 77-78c mark against the US dollar. Foreign fund flows into Australian equites and property are to blame. The RBA wants the dollar lower so a March rate cut is now more certain.
Economics
- The US central bank minutes from their last meeting revealed that many participants leaned towards holding rates lower for longer due to risks, including weak inflation, a stronger US dollar and global growth concerns.
- US consumer sentiment slipped early February according to a key survey, whilst one year inflation expectations rose to 2.8%.
- US import prices were down 2.8% in January from December levels as oil prices remained low. US inflation remains under control whilst the world continues to export/import deflation.
- Eurozone GDP (economic growth) grew 0.3% in the fourth quarter, above the 0.2% growth expected by economists. The outperformance was driven by an acceleration of growth in Germany.
Politics
- The federal government is canvassing the prospect of including the family home in the pension assets test as it strives to keep the retirement system sustainable over coming decades. It has been agreed that those already retired, or approaching retirement, would be exempt from any change (i.e. change would be transitional) so those affected would have ample time to prepare.
- It’s becoming somewhat more certain that Greece will get a six month extension on their debt to allow further time to come to an agreement on changes to their existing bailout package. The Greeks now appear not to want the extension (without continue with austerity) whilst the Germans are demanding adherence to the original deal with an extension.
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