10 Nov 2017
Aussie equity market breaks through 10 year high
Markets
- The local equity market broke through 6,000 points this week, reaching the highest levels in almost 10 years, buoyed by a rising US equity market and higher commodity prices.
- Asian equities hit their highest levels in a decade whilst Japan’s market rose to its best close since 1992.
- US earnings season has surprised on the up thus far with over 80% of the largest companies reporting 3rd quarter results. About 75% of those companies have reported positive earnings surprises and over 65% have reported positive sales surprises.
- Apple shares rose on strong demand for their iPhone X product, pushing the company’s market value above US$900 billion for the first time.
- In local stock news, Westpac’s full-year result came in slightly below market expectations, but the result was still solid, helped by an extremely low bad and doubtful debts charge.
- Orica reported a somewhat disappointing full-year result, with net profit and earnings coming in below market expectations and some of the management’s own guidance. However, the result did highlight some improving trends in Australia, Indonesia, and North America.
- Commonwealth Bank of Australia reported a solid set of numbers, with cash earnings coming in better than expected by the market, boosted by rate increases on interest-only loans and lower bad debts.
- James Hardie reported a strong rebound in the 2nd quarter with net profit after tax coming in above market expectations and a strong rebound in margins. The company also announced an acquisition in Europe, which will enable the company to further expand their fibre cement business.
Economics
- The Reserve Bank of Australia left rates unchanged at their November meeting. No real change in the rhetoric post the meeting. The bank remains in no rush to raise rates.
- The Australian retail sector continues to come under pressure, with no increase in consumer spending in September. The result fell short of market expectations.
- US jobs growth accelerated in October after hurricane-related disruptions in the prior month. But wages grew at their slowest annual pace in more than 1.5 years. No pressure on inflation here.
- China reported that imports in October rose 17.2% from a year earlier, beating forecasts and boosting spot commodity prices. Exports slowed.
Politics
- More of the US Republican tax reform plan was revealed with a proposed slash in the corporate tax rate to 20% (from 35%) and the ending of some tax breaks for companies and individuals. Overall, the plan will make the rich richer and make the rest worse off from an individual perspective, thus penalising those voters that actually voted Trump in.
- A corruption crack-down in Saudi Arabia saw their 32 year old leader round up family members and other wealthy individuals as he looks to assert his power in order to carry out his plan to revolutionise the country into an industrial powerhouse, and thus be less reliant on oil prices. The crack-down has wider geo-political ramifications, including the US’s role in the region and the potential next steps of Saudi’s arch enemy, Iran. The Saudi’s also intercepted a missile fired from Yemen, which was intended for their capital, allegedly supplied by Iran.
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