14 Jul 2017
Markets higher on dovish Fed
Markets
- Local and global equity markets rose this week, boosted by the US central bank chair’s dovish statements in front of congress.
- US companies are about to embark on quarterly earnings reporting with analysts estimating an increase in earnings of close to 8% from a year ago.
- In local stock news, Coca-Cola Amatil has been adversely impacted yet again, this time losing its contract with Domino’s Pizza to Pepsi. The loss comes after Woolworths declined to stock Coca-Cola’s new no sugar product.
- Domino’s is aggressively trying to cut in-store costs for their franchisees, with Pepsi undercutting Coca-Cola for the contract win and head office plans to reduce the size of its pizzas. Both moves may prove costly.
- The competition regulator (ACCC) has appealed the competition tribunal’s authorisation of the Tabcorp and Tatts merger. The move is likely to delay the targeted completion date of the merger but is unlikely to stop the merger given the tribunal’s tick of approval.
- Wesfarmers owned Coles has cut the price of a range of products in order to better compete with rival Woolworths, who themselves have completed their fair share of price cutting over the last 12 months.
- The Aussie dollar rose this week, on the back of rising commodity prices, as the US dollar remained flat. Dovish comments from the US central bank chair helped keep a lid on any upward US dollar pressure.
Economics
- US central bank chair Janet Yellen said interest rate hikes would be gradual and will not have to rise much further to reach a neutral level (ie. a level at which the economy can withstand). She also cited inflation remaining stubbornly below target.
- A US employment report showed the US added 222,000 jobs in June, representing the 2nd largest job haul of the year. US labour market remains strong.
- US consumer credit rose strongly in May, recording its largest growth in seven months.
- Chinese economic data surprised on the up with upbeat data on exports and imports for June, up 11% and 17% respectively. A possible sign that global demand is picking up.
Politics
- PM Malcolm Turnbull defended government policies aimed at putting downward pressure on power prices, including restricting gas exports to safeguard domestic supply. The Federal Government has accepted 49/50 recommendations from the electricity market review.
- Donald Trump’s presidency was again called into question this week after the release of emails between his son and a Russian lawyer showed the Russian government had information that would support Trump’s bid for president. US stocks didn’t take kindly to the news.
- US senate Republicans released their updated version of the healthcare reform act. As expected, it rolls back many of the provisions of Obamacare. Industry groups weren’t impressed. At least two Republican senators are already against the updated bill, which means it’s probably already dead.
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