2 Jun 2017
Markets
• Equity markets globally finished higher this week, buoyed by a strong read on US private sector employment which helped bolster investor confidence.
• In local stock news, telecommunication stocks came under additional pressure as the competition regulator handed down a ruling that increases the possibility of rising competition.
• A recent surge in the number of class actions against listed companies with embattled online retailer Surfstitch and embattled contract cleaning / facilities manager Spotless Group hit with claims over their alleged failure to meet continuous disclosure obligations to the market.
• Sydney Airport boss Kerry Mather has declared it will be able to deliver significant aviation growth from within the existing footprint (ie. no need for 2nd Sydney airport), as the company advances plans for an expansion that might include a new international terminal.
• The banking regulator, APRA, released data for the March quarter showing continued strength in investor home loan approvals (up 22% on same period last year) versus owner-occupier approvals (flat) for the big 4 banks. However, there were some positive trends in the quality of approvals with proportion of 90% plus LVR loans, loans approved outside of serviceability criteria, and interest only loans, all falling.
• Iron ore prices fell, hitting lows not seen since October 2016, amid lacklustre trading on Chinese markets. The news pushed the Aussie dollar lower. In other data, Chinese iron ore port inventories rose to the highest level on record.
Economics
• Australian building approvals increased strongly in April, but were still down significantly on the same time last year. Private house approvals increased over the month, but were also down significantly on the same time last year.
• Australian credit growth in April was in line with expectations, though the annual pace has now slowed to the slowest since May 2014. The annual pace of business credit growth continued to slow whilst housing credit maintained its annual pace at 6.5%. Other data showed average home prices in Sydney and Melbourne have begun to fall.
• US economic data remains a little softer than expected given the growth trajectory of the economy. 1st quarter economic growth was revised upwards, but remains a little underwhelming as was consumption growth, whilst investment growth was a little more positive. The market now expects a big improvement in 2nd quarter data given underlying trends in the economy.
• The bond markets continue to price an 89% likelihood of a US interest rate rise in June. However, many now expect that rise to be accompanied by a more dovish tone, thus lowering the pressure and expectations for future rate rises.
• European central bank president Draghi indicated that their current extraordinary amount of monetary policy support remains necessary given the data at hand, even in light of the recent upswing in conditions.
• Japanese economic data showed signs of improvement with inflation higher and a reported 260,000 job increase in April. The job increases kept the unemployment rate steady at 2.8%.
Politics
• The G7 summit (the world’s largest industrialised nations) failed to agree to a common stance on climate change or trade. US President Trump was cited as the main protagonist with Italian media coining the phrase “G6 + 1”. No one should be surprised given Trump’s outlandish stance on climate change and trade to date.
• Chinese regulators are tightening lending to property developers in an effort to curb the overheated real estate sector. Beijing’s May home prices declined for the 2nd consecutive month as transaction volumes fell.
