31 Oct 2014
Markets
- Markets globally pushed higher even in light of investor caution leading into the results of the European Union bank “stress test”.
- Concerns regarding the spread of the Ebola virus provided a little bump, whilst the markets paid little attention to the US Fed ending their quantitative easing (money printing / asset purchases) program.
- Corporate earnings results were strong across the globe this week. Australian and European results were encouraging, whilst the US continued its run of strong results over the last couple of weeks (71% of US companies have now beaten analysts’ estimates).
- In stock news, CSL is set to acquire Novartis’ global influenza vaccine business for $312m with a view to combining it with their existing influenza vaccine operations. The merged entity will create the 2nd largest global player in the US$4bn global influenza vaccine industry.
- BHP Billiton appears to have lost patience with the asset that forged its entry into the US shale business, declaring it will look to sell its Fayetteville venture on which it has taken a hit of more than $US2bn ($2.27bn). They won’t be selling at any price though.
- National Australia Bank will consider a public float of its UK business, after more than $1bn of costs related to the troubled operations dragged down the bank’s full year cash profit, in line with expectations. Revenue was up 5.7% to $19.25bn.
- Wesfarmers reported a bumper quarterly result with retail sales above $13.5bn following a solid lift in sales at Coles and Bunnings. Coles delivered a quarterly sales jump of 4% whilst Bunnings and Officeworks combined sales were up 10.5%.
Economics
- Australians are becoming more upbeat about the economy as worries about the federal budget fade and the share market picks up steam. A key consumer confidence index hit its highest level in 12 weeks, and expectations about the economic outlook bounced 10%.
- The US Federal Reserve announced the end of their quantitative easing stimulus program, after 6 years of pumping easy money into the US economy via asset purchases to shore up growth. They reassured that they would not raise the cash rate for a “considerable time”.
- US GDP (economic growth) grew by 3.5% in the 3rd quarter. Economists had been expecting a more modest rise of 3%. The numbers were boosted by strong export numbers.
- US consumer confidence rose to a 7 year high in October, well above forecasts.
- Chinese house prices have fallen for the first time in nearly 2 years according to data released by the Chinese government. No surprises here given the massive oversupply in new housing.
- Chinese consumer sentiment hit a 3 year low in October as consumers downgraded their views on employment, the housing market and their personal finances.
Politics
- Prime Minister Tony Abbott has opened the door to a potential increase in the GST in combination with income tax breaks. The GST solely benefits the states, thus reducing the assistance the Federal Government provides them. GST is one of the most equitable forms of taxation, but it should be expanded across all goods and services and should be complemented with genuine tax reform across the board. No surprises, Labor will fight any increase.
- Brazil’s stock market sold off following the re-election of incumbent leftist President Rousseff. She has been anti-business and will continue to be.
Chris Lioutas
Chief Investment Officer
PSK Financial Services
