2 Feb 2018
Inflation still too low for RBA rate rises
Markets
- The local equity market finished higher this week whilst global equity markets were more mixed.
- US company reporting season is progressing along strongly, with market estimates for the largest 500 companies being revised higher to above 13%, on the back of nearly 80% of companies having beaten expectations thus far.
- US healthcare stocks fell sharply during the week after Amazon, Berkshire Hathaway, and JPMorgan announced they would partner in an effort to cut healthcare costs and improve services for their US employees, rumoured to be over 1 million people.
- In local stock news, Commonwealth Bank has named retail banking boss Matt Comyn as its new CEO, replacing Ian Narev. The internal appointment came somewhat as a surprise as the bank was expected to look externally.
Economic
- Australian inflation came in below expectations in the December quarter, printing 1.9% on an annual basis. Inflation remains below the RBA’s band.
- The US central bank kept rates unchanged, with rising inflation likely to result in another 2-3 rate rises this year.
- US 4th quarter economic growth came in at 2.6%, below the 3% forecast, as the strongest pace of consumer spending in 3 years resulted in a surge in imports. Economic growth for the full year came in at 2.3% versus a 1.6% increase in 2016.
- US consumer confidence jumped in January, coming in above expectations.
- The UK has published some solid economic data with a strong rise in 4th quarter economic growth. Employment rose to a record high, whilst the budget deficit declined more than forecast to its lowest level in 17 years.
- European economic growth in the 4th quarter rose in line with forecasts, coming in at 0.6%. The French economy, in particular, accelerated at its fastest pace in 6 years.
Politics
- The Federal Minister for Health has approved an average premium increase for Health Insurance of 3.95% for the industry, the lowest premium increase in 17 years
- US government officials have pro-actively talked down the US dollar with comments from both the head of the Commerce department and Treasury. The Europeans and Japanese have steered clear of reacting as President Trump continues his threat of protectionism.
