31 Aug 2018
Markets higher as FAANG stocks power ahead
Markets
- Equity markets were mostly higher this week, supported by US tech stocks and more promising trade news.
- In local stock news, Brambles’ full year result was in line with market expectations, with earnings up 4% and group sales up 6%. The company flagged that input cost inflation remains an issue, whilst also flagging the potential demerger / sale of its reusable plastic containers business.
- Stockland Group reported a strong full year result with earnings up over 6%, driven by strong growth from their residential division which management expects to continue. The company’s retail assets (shopping centres) underperformed due to revaluation losses in a tough retail environment.
- Westpac announced a 3rd quarter update that showed its net interest margins had fallen quite considerably mostly due to higher funding costs, which hurt given their very large exposure to residential mortgages. The bank subsequently announced an interest rate rise across their whole loan book.
- Spark Infrastructure reported a reasonable 1st half result with earnings up over 6%. The interim dividend declared was in line with expectations and the company reaffirmed their previous full year dividend guidance. Regulatory uncertainty remains.
- Ramsay Healthcare’s full year result was in line with market expectations. Revenue was up 5.4% whilst earnings were up over 6%. Australian and French divisions performed better than expected, whilst the UK was weaker than anticipated. Earnings guidance for the year ahead disappointed.
- The telecoms sector gained after the announcement that Vodafone Australia and TPG Telecom will merge into a single $15bn business. Vodafone shareholders will own 51% of the merged entity. TPG founder David Teoh will become chairman whilst the CEO of Vodafone will become CEO of the combined group.
Economic
- The US commerce department confirmed that the US economy grew at annual rate of 4.2% in the June quarter. The rate was upwardly revised and was the economy’s best performance in nearly 4 years.
- The US central bank chairman all but confirmed that the bank’s current pace of rate hikes (gradual) remains appropriate, in a key a speech delivered at the annual global central banker gathering in Jackson Hole, Wyoming.
Politics
- A poll has shown that popular support for the Coalition has fallen to its lowest level in a decade, with Labor now ahead. Hardly surprising given the level of infighting and the resultant spilling of PM Turnbull. The same poll has Bill Shorten favoured over Scott Morrison.
- A senior US trade official announced that a deal with Mexico is to replace the North American Free Trade Agreement, and that talks with Canada were likely to commence soon.
- A Bloomberg report has indicated that President Trump wants to impose proposed tariffs on an additional US$200bn of Chinese imports as early as next week.
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