12 May 2017
Equity markets push higher on Macron win
Markets
- Equity markets globally continued to push higher this week, supported by the French presidential election result.
- In local stock news, Macquarie Group reported a reasonable full year result, with net profit up 4%, a strong increase in the dividend, and a solid increase in bank regulatory capital on their balance sheet. Standout was their banking and financial services division. Deposits rose 10%.
- Telstra shares rebounded after the competition regulator ruled the company should not have to share its network infrastructure (regional) with its competitors.
- Westpac reported 1st half earnings in line with market expectations. However, some of the underlying components were a little soft, with margins contracting and expense growth higher than income growth. Loan impairment charges continue to fall.
- Commonwealth Bank of Australia reported a strong 3rd quarter result with cash profit up 4.3%, assisted by growth in home lending which has outpaced peers. Bad debts rose, but impairment charges and provisions halved from those reported a year ago.
- Crown Resorts has sold the remaining interest in their Macau joint venture as part of their plan to focus solely on their Australian business. Investors reacted positively as it means the business is more streamlined and can significantly reduce debt, which may result in increased dividends and share buy-backs.
- Oil prices rose following news that OPEC (cartel of oil producing countries) and non-OPEC nations were close to agreeing to a fresh deal on supply cuts.
Economics
- The Federal Government released a fairly robust and sound budget, and remains on track to achieve a budget surplus in 2020/21. More information can be found here.
- The latest retail sales figures are showing a concerning sign about the health of the household sector, specifically around stretched household finances and waning consumer sentiment. Weak wages growth is the other major issue. The current retail sales momentum isn’t looking good for the 2nd quarter.
- Australian residential building approvals fell by a steep 13% in March from the previous month and were down nearly 20% on the same time last year. Homebuilding boom is losing steam.
- US jobs data returned to strength in April with an increase of 211,000, indicating that the relatively small 79,000 jobs gain in March was weather related. The unemployment rate fell to a low of 4.4%, but average hourly earnings remained underwhelming relative to that level of employment. Green light for the US Fed to raise rates in June.
- The China April trade data showed exports and imports slowing more than expected. The data followed the soft China manufacturing data for April. Both are negatives for commodity prices and commodity exporting countries (Canada, Australia, etc). The data put further downward pressure on the Aussie dollar.
Politics
- French centrist politician Emmanuel Macron enjoyed a decisive victory in the presidential election and becomes the youngest president in the country’s history. His next challenge is to secure a majority for his party, or form a workable coalition, at the parliamentary elections next month. Markets reacted positively to the result.
- US Republican Senators have already indicated they will push aside the healthcare repeal bill, recently passed in the lower house, to write their own bill with no clear timetable. The slimmer Republican majority in the Senate makes it highly unlikely this goes anywhere anytime soon.
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