21 Oct 2016
Positive start to US reporting season propels markets higher
Markets
- Global share markets pushed higher as US 3rd quarter reporting season got off to a good start, with the banks and Netflix reporting strong results.
- The Aussie share market came under pressure late in the week following some poor company results and concerns regarding the composition of recent employment data.
- In local stock news, Crown Resorts had 18 company employees rounded up and detained by the Chinese authorities. Unconfirmed reports point to the issue being in relation to their VIP business activities. Very little information has been released. The share price came under heavy pressure.
- Tabcorp Holdings and Tatts Group announced an intention to merge the two companies into a $9.4bn Australian gaming behemoth. Under the proposal, Tatts shareholders will own close to 60% of the combined entity. Likely the competition regulator won’t be impressed.
- The race has heated up to buy Woolworths’ petrol station business as BP and Caltex have both submitted bids, likely to around the $1.6bn mark.
- Origin Energy says it’s on track to deliver an increase in full year earnings of 45-60% and a reduction in debt to well below $9bn by the end of the 2017 financial year.
Economics
- Australia’s new central bank governor hinted that rates don’t need to go lower if current conditions hold. However, further falls in inflation and deterioration in labour markets would force their hand. They are now acutely aware of the reaccelerated overheating in the east coast property market.
- Australia’s unemployment rate fell to 5.6% in September as fewer people were looking for work. The number of full-time workers fell sharply, continuing the recent under-employment trend.
- US central bank chair Janet Yellen spoke this week, indicating that she was happy for employment conditions to get tighter and for the economy to heat up (ie. happy for inflation to run at much higher levels), thus reaffirming the go-slow on future rate rises.
- US retail sales disappointed whilst US consumer sentiment fell in October. Industrial production was weaker year on year.
- UK inflation surprised on the up, reaching its highest level in almost 2 years. A sharp fall in your currency will do that.
- The European Central Bank decided to leave its monetary policy (interest rates and QE) unchanged, confirming that the current asset purchase program (QE) would continue at least until the end of March 2017. Based on current conditions, that date will be well extended.
- The Chinese economy grew at annual rate of 6.7% in the 3rd quarter, in line with expectations. Other key data such as industrial output, retail sales, and fixed asset investment also met expectations.
Politics
- Latest polls have Hillary Clinton holding a big lead over Donald Trump. Not surprising given the negative news flow and headlines continuing regarding his past indiscretions. If the swell of anger is high enough, it may also lead to Democrats have a majority in the Senate, which would make Clinton’s job much easier. Republican officials are now starting to distance themselves from Trump in order to save their own seats.
