3 Nov 2017
Markets buoyed by Trump’s Fed Chair nomination
Markets
- Local and global equity markets finished higher for the week, assisted by President Trump’s market-friendly nominee to run the US central bank.
- In local stock news, ResMed’s first quarter sales rose by 13%, helped by a new range of sleep apnoea masks which has helped the company improve its market share. The market liked the result.
- Premier Investments, led by Solomon Lew, says it is considering possible legal action against Myer over the department store chain’s alleged lack of disclosure. Premier is looking for board seats and the removal of management. Myer slashed its long-term sales targets, with sales down nearly 3% on the same time last year.
- Fairfax Media shareholders have voted in favour of the separation of the company’s real estate business Domain. Fairfax will retain a 60% interest in Domain whilst Fairfax shareholders will hold the remaining 40%.
- National Australia Bank reported a $6.6bn cash profit, up 2.5% from last year. Revenue and margins were high, but so were costs. The company announced they will remove 6,000 jobs over the next few years whilst adding 2,000 new digitally focused roles.
- Woolworth’s 1st quarter sales results came in ahead of expectations, with the core Australian food business growing sales 4.9%. The big surprise was Big W with sales growth turning positive. The company reported higher food price deflation during the period.
Economics
- Australian housing credit expanded by 0.5% in September, keeping the annual rate at 6.6%. Investor lending growth slowed whilst owner-occupier credit growth rose slightly. Annual growth peaked in mid-2016. Credit growth to businesses and the private sector came in below expectations.
- Home price growth in capital cities has continued to slow on a quarterly basis, weighed down by tighter lending standards, higher borrowing costs, and general buyer fatigue. Sydney home prices fell 0.6% over the quarter and were down 0.5% over the month. Melbourne remained resilient.
- US economic growth increased at an annual rate of 3% in the 3rd quarter, coming in ahead of expectations, and delivering the best back-to-back quarterly growth in 3 years. Even more impressive considering the disruption caused by multiple hurricanes during the quarter. Consumer spending and non-residential investment were up strongly.
- US core inflation came in at a disappointing 1.3% annual rate, up from 0.9% in the 2nd quarter, but still well below the central bank’s 2% target.
- A key US consumer sentiment index printed at its highest level in 13 years in October.
- Eurozone unemployment fell to an 8 year low, falling to 8.9% in September, coming in better than expected. Core inflation fell to just 0.9%, and is currently too low to pressure the ECB to significantly change course (ie. higher rates and less asset purchasing).
- China’s industrial profits surged nearly 28% in September from a year earlier. Astonishingly, this represented an acceleration from the 24% rise in August and the biggest surge in almost 6 years.
Politics
- Reports from the US seem to indicate that the House of Representatives is considering phasing in corporate tax cuts rather than enacting them immediately. Makes plenty of sense from an economic and budget perspective, but not what the equity market is looking for.
- US President Trump nominated Jerome Powell to run the US central bank, largely as expected. He is seen as a safe pair of hands that will continue the work done by current Chairwoman Janet Yellen (ie. slowly raising rates and reducing the size of their balance sheet).
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