10 Mar 2017
Green light for US Fed to raise rates
Markets
- The local equity market finished higher whilst global markets took a breather this week.
- In European bank news, Deutsche Bank finally announced measures to plug capital concerns with an 8 billion euro equity raising at a 40% discount. They also announced that underlying businesses will be merged to cut costs.
- In local stock news, the competition watchdog has all but given the go-ahead (bar some minor concerns) for the Tabcorp and Tatts $11bn merger, with the regulator satisfied there is enough competition from online betting operators to ensure punters have choice over where to place their bets.
- Insurers Insurance Australia Group and Suncorp have indicated that the February Sydney hailstorm could cost them up to $370m, with over 30,000 claims combined.
- Theme park operator Ardent Leisure Group continues to struggle with revenues down 35% on the same period last year. However, the market took some comfort in this being an improvement on December and January numbers.
- Iron exports out of Port Hedland were somewhat weather-impacted in February with numbers the softest since July 2016. Volumes were still 1% higher than February 2016.
- The oil price fell this week, below US$50 per barrel for the first time this year, hurt by news that the Russians aren’t being fully compliant with their promised production cuts and by reports of a strong rise in US supplies.
Economics
- The Reserve Bank of Australia chose to leave the cash rate unchanged, releasing a statement with little changes from the previous month’s statement. The result was expected.
- Australian retail sales are now growing at 3.1% on the same time last year, having met expectations in the month of January. The overall number was ok given low wages growth and a mixed jobs market. Takeaway food and clothing were up strongly, whilst recreational goods and department stores were soft.
- The probability of a US interest rate hike spiked during the week, from around 50% to an 80% probability, helped by some comments from the central bank chair which were interpreted as being hawkish.
- US employment data continues to impress with a private sector report showing better numbers than expected, with 298,000 new jobs in February, the most since April 2014.
- The European central bank decided to keep their asset buying program (quantitative easing) and interest rate settings unchanged. President Draghi stated that the downside risks to the euro area economy were now less pronounced.
- China’s national policy committee has guided for a 6.5% economic growth target for 2017, which is a touch lower than last year’s target.
Politics
- Geopolitical risk was back in the headlines, with North Korea firing 4 ballistic missiles, some landing inside Japan’s exclusive economic zone.
- Polls in Europe showed some falls in support for populist candidates in France and the Netherlands.
- The Victorian state government has announced a number of housing initiatives to help first home buyers, including abolishing stamp duty (up to $600k), a pilot program for low income earners with government funding help by taking an equity share up to 25%, abolishment of stamp duty concessions on off-the-plan properties, and a property tax on vacant residential land.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here.
