6 Oct 2017
Equity market volatility hits lowest recorded levels
Markets
- Local and global equity markets finished higher for the week.
- In local stock news, QBE shares fell sharply after the company announced it expects a US$600m hit to its 2017 earnings following 4 damaging cyclones and the Mexico earthquake. The market wasn’t impressed that their reinsurance wasn’t sufficient to cover the increased claims.
- Origin Energy has announced the sale of its subsidiary for $1.585bn to Beach Energy. The net proceeds, a little over $1bn, were broadly in line with Origin’s carrying value of the subsidiary. The sale will allow them to bring their net debt levels well below their June 2018 target.
- The closely followed equity volatility index declined this week to its lowest level ever. Investors remain complacent.
- Oil prices were somewhat supported by bullish comments from Russia’s energy minister who indicated Moscow would support new countries joining the production cut deal between OPEC and select non-OPEC producers, and that the deal could be extended until the end of 2018.
- Weaker retail sales and personal credit growth resulted in a lower Aussie dollar.
Economics
- The RBA left rates unchanged at its October board meeting. The minutes of the meeting contained no new insights and largely replicated the statement from the September meeting. No need for the RBA to do anything given most data remains neutral to weak.
- Private credit growth remained robust in August with a 0.5% rise in the month and up 5.5% on the same time last year. Business credit growth momentum continued to build. Housing credit growth remained strong, but investor lending growth slowed further. Personal credit growth continued to go backwards.
- Australian retail sales disappointed in August, with a tougher trend emerging. Outside of department stores, all other categories saw falling sales on the same time last month.
- A key US manufacturing index rose strongly in September from August levels, hitting a 12 year high and comfortably exceeding expectations.
- US private sector jobs growth for September fall sharply, but came in ahead of expectations as forecasters had moderated their expectations due to hurricane disruptions.
- Eurozone retail sales came in softer than expected in August.
- Minutes from the European central bank’s last interest rate meeting seemed to suggest a continuation in the lower for longer approach when it comes to interest rates.
Politics
- US Congress has passed a US$1.4 trillion budget, which is a positive small step towards much anticipated tax reform. The budget bill must now pass the Senate.
- Speculation continues to mount as to who will be the next chair of the US central bank. The current rumoured short-list of candidates all have somewhat different views on current and future policy settings.
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