8 Feb 2019
Aussie dollar falls as RBA turns dovish
Markets
- Local and global stock markets mostly finished higher this week, though global markets will likely finish with some turbulence, following reports Presidents’ Trump and Xi won’t meet before the trade deadline.
- US company reporting season remains supportive of current valuations with over 70% of the largest 500 companies that have reported so far have exceeded analysts’ estimates.
- In local stock news, financial sector stocks rose following the release of the Royal Commission report, with investor concerns somewhat alleviated by the findings. The market response was off a low base though.
- Boral shares fell after the company cut its domestic outlook and flagged that delays at big projects would hurt half year profits.
- James Hardie shares bounced after the company reported a solid 3rd quarter result in the face of weak US housing starts. Volume growth and pricing were better than market expectations.
- National Australia Bank shares went into a trading halt prior to both CEO and Chairman announcing they will be stepping down, following their singling out in the Royal Commission findings.
- AGL shares fell after the company announced further investment in their assets, in contrast to investors wanting them to undertake a stock buy-back to boost earnings.
- The Aussie dollar fell this week following the RBA’s comments that interest rates could move in either direction going forward.
Economics
- The RBA left rates unchanged as expected, but the focus was on their rhetoric which was clearly more dovish, with the potential that the next rate move is down. As always, any move will be data dependent.
- Australian home building permits fell sharply for the 2nd month in a row. Approvals to build or renovate declined by 8.4% in December from a month earlier, with apartment approvals alone falling another 18% after an 18% drop in November.
- Australian jobs ads fell over 3% over the past year according to data released by the ANZ bank. Business conditions now falling along with confidence.
- US payroll data showed a jump of 304,000 jobs last month, which is the largest gain since February last year, coming in well above economists’ expectations. There was also better than expected manufacturing activity in January.
- The US unemployment rate edged slightly higher, whilst the underemployment rate jumped to an 11 month high of 8.1% in January. The underemployment rate includes those that have given up searching and those working part-time that want to work full-time.
- The European Commission slashed its Eurozone growth forecasts for 2019 and 2020 as trade tensions and political risk hit home.
- China’s manufacturing sector contracted for the 2nd straight month in January.
Politics
- The Federal Government has shifted from bank bashing (not good when house prices are falling) to energy bashing with the Federal Energy Minister decrying AGL’s half year profit. Considering the government’s preference for little to no competition in the sector, profits are going to be high. How about incentivising companies to invest.
- The US Treasury Secretary said trade talks with China were very productive and confirmed that he and other officials will travel to Beijing for the next round of meetings.
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