11 Nov 2016
Markets bounce on Trump win
Markets
- After warnings that a Trump White House would create uncertainty and damage sentiment, markets turned a blind eye focusing on his acceptance speech and promise of fiscal spending.
- The Aussie market recovered its steep losses from the day of the election as our market was one of the few that were actually open during the vote count.
- In local stock news, Domino’s Pizza highlighted revenue up by more than 32%,with 484 new stores added to the network. The company launched Project 3-10, aiming to have pizza ready for pick-up in 3 minutes or delivered in 10 minutes from the time of placing the order.
- CBA bank advised that their cash earnings for the September quarter were $2.4bn. Operating income growth fell but credit quality remained sound. The all-important net interest margin fell whilst expenses were tightly managed.
- Orica shares have jumped to 16 month highs following a strong result from the company as the slump in resource sector spending may have found a bottom. Net profit after tax was up strongly, falling just shy of expectations.
- The Inghams float officially listed on the stock exchange following significant changes from their private equity owner. We weren’t impressed with the original proposal. The adjusted proposal saw the listing price fall significantly and the private equity owner retain a much large stake (better alignment).
- Iron ore prices have risen almost 25% in the past month, boosted by steel production cuts and speculators in the Chinese commodity futures market.
Economics
- The Reserve Bank of Australia released its statement on monetary policy which indicated they’re reasonably happy and comfortable with the current economic setting. So no need to cut rates further unless inflation falls further from here or the Aussie dollar spikes.
- Australian job ads rose fractionally in October, but numbers were still up 5.2% on the levels of a year earlier.
- Australian consumer confidence fell in November, mainly the result of a rise in households’ unemployment expectations, which is further evidence that the labour market is softening.
- US employment numbers remained strong with nonfarm payrolls increasing by 161,000 in October, supported by strong growth in the services industry.
- The US unemployment rate now stands at 4.9% whilst hourly wages have increased 2.8% over the past year. US Fed rate rise is now highly likely for December.
Politics
- Donald Trump unexpectedly defeated Hillary Clinton to win the US Presidential nomination, with a big voter turnout from the poor and middle class (“the forgotten”) snubbing their nose at the Washington establishment. Republicans will now control both houses (first time in 88 years) and the White House, and will likely end up with a Republican-friendly Supreme Court.
- The UK government is attempting to get the UK High Court to issue Article 50 (exit from the EU) in order to bypass parliament for fear of not getting it through. The government lost its High Court case and has elevated it to the Supreme Court. If unsuccessful, they may be required to call an early general election to obtain a second mandate from the UK public for exit.
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