4 Aug 2017
Australian building approvals through the roof
Markets
• Equity markets closed up this week, buoyed strong results out of US company reporting season, with Apple reporting a bumper result.
• In local stock news, iron ore miner Fortescue Metals shipped a record amount of iron ore during the June quarter. The company continues to slash their debt levels whilst getting mining costs down to $15 per tonne, against an iron ore price of $72.
• ResMed reported strong 4th quarter results, with net profit after tax up 5% on the same time last year, ahead of market estimates. Revenue and sales both came in strongly with high single digit growth, and gross margins were in line with expectations. The company lifted their 4th quarter dividend.
• Suncorp announced a full year cash profit of $1.075bn, an increase of 3.6% on last year. Despite the lift, the result fell short of market expectations, with the bank division dragging whilst the insurance division performed strongly. A reduction in excess capital means the run of strong dividend increases may have come to an end.
• The Commonwealth Bank of Australia has been hit with civil proceedings by AUSTRAC for anti-money laundering and counter-terrorism financing breaches. The issue specifically relates to the new breed of ATMs which can accept deposits by both cash and cheque. If CBA is found guilty, there is the potential for a significant fine.
• Rio Tinto has announced cash returns to shareholders of $3.77bn, with a higher dividend than expected and an upsized share buy-back. Some parts of the market were disappointed, wanting a larger cash release, whereas the company chose to build up its cash reserves thus lowering gearing to just 13%. The company reported softer earnings than expected.
Economics
• Australian building approvals in June were much stronger than expected, with approvals up nearly 11% over the month which follows a 5.6% drop in May. The sharp rise was a result of the surge in apartments and townhouses, which was up 20%. Developers getting everything that can approved before things slow further.
• Australia’s trade surplus narrowed significantly in June as imports rose strongly whilst commodity exports fell. Negative from a national income perspective, but positive from the perspective that greater imports usually means businesses are investing.
• US economic growth rebounded strongly in the 2nd quarter, but still came in below expectations. 2nd quarter growth came in at 2.8% versus 1.2% in the 1st quarter.
• A key US business activity index has fallen in July, whilst pending homes sales rose in June ending a 3 month losing streak. Non-manufacturing activity also fell in July.
• A key US manufacturing activity index fell in July versus June’s reading, whilst the US central bank’s preferred measure of inflation slipped in June continuing its worrying downward trend.
• There are now more full-time permanent jobs being advertised in Japan than there are applicants for them. Full employment, aging population, low birth rates, and no immigration, all whilst the economy begins to improve.
Politics
• In a sign of desperation, the Queensland Premier has instigated a new “buy local” policy (specifically Queensland). Much like South Australia’s very own bank tax, long term state budget mismanagement brings about extreme and counter intuitive policies which end up hurting the state even further down the track.
• More White House drama with President Trump firing his communications director 10 days after he appointed him. The move was hardly surprising.
