4 May 2018
Broad gains push Aussie share market higher
Markets
- Local and European equity markets finished higher for the week, whilst Asian market were mixed and the US equity market finished lower.
- The bumper US company quarterly reporting season continued with nearly 80% of companies beating market earnings estimates. More than 50% of the largest companies have reported, with analysts now expecting 1st quarter earnings growth of nearly 25%.
- Some big M&A deals were announced this week with a potential tie up between UK grocery giants Sainsbury and Asda, US telecom giants Sprint and T-Mobile, and 2 large US oil refiners. All 3 are $20bn plus deals.
- In local stock news, ResMed’s 3rd quarter results were strong with revenue increasing 15% on the back of strong ongoing underlying demand and good cost control. The company maintained their market share. Ex-US growth was very strong, whilst US growth did slow.
- Brambles’ sales revenue for the 1st nine months of the financial year was up 5%, boosted by their non-US business. Results for the US business were in line with guidance.
- The AMP chair has resigned whilst the group general counsel and company secretary will also be leaving the business. The company has said that directors will take a 25% pay cut for the remainder of 2018. The company is still considering the employment and remuneration consequences for those staff directly involved in the misconduct.
- Stockland reaffirmed its guidance for profit growth of 5-6.5% for the financial year. Whilst their residential margins had fallen a little, the company had over 6,000 contracts on hand at the end of March and was on track to complete 6,500 residential contracts by the end of the financial year. The company also reaffirmed its dividend guidance.
- ANZ bank’s 1st half result was mixed with capital and asset quality strong whilst margins contracted. Cash earnings and the interim dividend were in line with market expectations. 1st half expenses were also higher than expected. National Australia Bank’s result was very similar.
Economics
- The Reserve Bank of Australia left the official cash rate at 1.5%, with current policy remaining appropriate in light of weak household spending and wages growth.
- Growth in the US economy slowed in the 1st quarter as consumer spending grew at its weakest pace in nearly 5 years. Economic growth came in at 2.3%, slower than in the prior recent quarters, but better than market expectations.
- The US central bank’s preferred measure of inflation rose in-line with market expectations in March. The year on year figure is now 1.9%, rising, but remains below the bank’s 2% target.
- UK economic growth slowed much more sharply than expected in the 1st quarter, the slowest in 5 years, slashing the market’s expectations the Bank of England will raise rates in May.
- German unemployment claims decreased less than anticipated in April, but unemployment remained at a record low of 5.3%.
- Chinese industrial profits slowed to 3.1% in March, on the same time last year, and far slower than February’s 10.8% climb. It marked the weakest growth since December 2016.
Politics
- The leaders of both South and North Korea have pledged to work for the complete denuclearisation of the Korean peninsula. Time will tell whether actions follow.
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