16 Sep 2016
Markets
- It was a tough start to the week for markets as investors fretted, unnecessarily, over a US rate rise in September.
- Calm then set in and everything went back to normal as the odds of September rate rise diminished. We are talking about a 0.25% rise after all.
- In local stock news, Origin Energy announced the retirement of long-time CEO Grant King, naming internal candidate Frank Calabria as his replacement. No surprises here. He announced that the focus will be on debt reduction going forward.
- ANZ CEO has rejigged the bank’s operating structure resulting in the departure of the COO. The bank’s technology, operations, and shared services will be reorganised to get closer to customer businesses and amplify efficiency gains (ie. cost reductions).
- Sales at Masters have rocketed in the first 2 weeks of its $500m hardware and home improvement sale. Foot traffic through its 61 stores is also in double-digit growth, with management confident that they will clear all their stock by December. Nothing like a fire sale to clear the decks.
- JB Hi-Fi announced it has agreed to acquire the Good Guys for $870m. The acquisition will boost their consumer electronics market share to 24% and their home appliances market share will surge to 29%. Fair to say Gerry’s not happy.
- Oil prices fell after the International Energy Agency cut its 2016 demand forecast and warned that oversupply will continue in 2017.
- Iron ore exports totalled 43 mega tonnes for August 2016, up 11% on the previous month and up more than 9% on the same time last year, in a near-record month for ore exports.
Economics
- The recent 2nd quarter capital expenditure (business investment) survey revealed a material improvement in the outlook for investment. The jump in business investment plans represents the best upgrade in 6 years, suggesting the worst of the investment drag might be behind us. Though, the number did come off a very low base.
- Australia’s July trade deficit came in narrower than June and better than expected. Exports rose 2.8% whilst imports fell 0.4%. The growth in tourism exports is helping given the lower Aussie dollar.
- July housing finance approvals fell, driven by falls in owner-occupier approvals, while investor approvals ticked slightly higher. New investor housing credit is now running below the regulator’s 10% guidance cap, so there is still scope for investor lending to pick up further. Investor share of approvals has also been falling.
- A key consumer confidence survey showed that the rise in August was sustained in September. When asked where the wisest place to invest was, just 15% of people said real estate, down from the peak of over 28% reached in the 3rd quarter of 2015.
- The 3,900 fall in employment in August was boosted by people being temporarily employed to conduct the Census. As such, the fall was probably closer to 14,000. The unemployment rate fell to a four year low of 5.6%, mainly the result of a fall in the participation rate.
Politics
- The Federal Government has secured a $14bn budget gain by striking a surprise deal (compromise) on superannuation changes. The $500k lifetime cap has been scrapped, whilst the $1.6m pension cap has been maintained. The revised plan imposes an annual $100k cap, but offers flexibility, and the proposal to make it easier for 65-74 year old’s to contribute to super has been shelved. Shows the Government is willing to compromise but is clearly an about-face.
The Greek PM said that debt relief is needed for growth, warning Eurozone leaders that Greece would struggle to return to sustainable growth without a debt-relief deal. The call comes as Greece as fallen behind in their schedule to satisfy the requirements of the bail-out funding.
