4 Nov 2016
Markets down as Clinton takes a battering in the polls
Markets
- Strong US M&A activity has failed to overcome some poor earnings reports and the uncertainty of Trump in the Whitehouse.
- This, in addition to little action from central banks globally, meant investors were net sellers of equities this week.
- In local stock news, ANZ bank announced that it sold its retail and wealth management business across 5 countries in Asia to a Singaporean bank. The sale will result in a net loss, but will improve their capital position and bring greater focus back to Australia & NZ. The bank will retain its higher margin institutional business in Asia. The bank’s full year result was messy.
- Rio Tinto announced that it had agreed to sell its entire stake in the Simandoubauxite (alumina) project in Guinea to Chinalco. Rio will receive payments of between $1.1-1.3bn. Greater focus on core assets continues.
- Woolworths has announced an improved 1st quarter grocery (food) sales result, up 1.7% to $9.3bn. In other divisions, petrol sales were lower, liquor was up solidly, NZ food sales were up, whilst Big W disappointed.
- Macquarie Group reported a strong 1st half result, with net profit coming in above market consensus and above Macquarie’s recent guidance. The 1st half dividend declared also came in above market estimates. The big kicker was a significant reduction in their tax expense, whilst underlying divisions performed as expected.
- Oil prices fell after an OPEC meeting resulted in no deal, raising questions whether the world’s biggest oil producers can implement supply cuts at an official gathering in November.
Economics
- The Reserve Bank of Australia left the cash rate unchanged at 1.50% as expected, citing no changes to their forecasts and expectations for growth and inflation. The big risk now is employment data, with any deterioration over the next couple of months likely to force the RBA’s hand early next year.
- Australian credit growth continued to be subdued rising 0.4% in September as expected. Annual credit growth is now running at the slowest rate of growth since September 2014.
- US 3rd quarter economic growth came in stronger than expected, with the largest quarterly gain in 2 years. The underlying components weren’t as strong.
- US personal spending rose in September as did personal income. The preferred inflation measured of the US central bank remained steady at 1.7%.
- Eurozone economic growth for the September quarter grew in line with forecasts, whilst the UK equivalent was better than expected.
- A key Chinese manufacturing data point rose well above expectations, reaching the highest level in just over 2 years.
- Japanese inflation data deteriorated further, thus putting greater pressure on the Japanese central bank to revise down its inflation forecasts and push back the expected timeframe for reaching its 2% target.
Politics
- What a difference a week makes in politics with Hillary Clinton now under severe pressure in light of the renewed focus on the FBI’s investigation into her private email accounts when she was secretary of state. Rumours of a cover up and delayed investigation haven’t helped her campaign, with Trump closing in on her lead.
- In Spain, acting PM Rajoy won a simple majority to finally form a government. 12 months on and counting.
