11 Aug 2017
Rising North Korean tensions sour investor sentiment
Markets
• Equity markets fell locally and globally as investors sought safe havens as President Trump escalated his warnings towards North Korea.
• In US company reporting season, more than 70% of the largest companies have beaten consensus earnings and sales forecasts.
• In local stock news, Tabcorp swung to a headline loss, following plenty of one-off negative items including write-downs and costs associated with its Tatts takeover. The company’s underlying results were a little soft with revenues up 2% and earnings down 4%.
• James Hardie’s first quarter result (reports in the US) fell, mostly due to higher production costs and capacity constraints. Pleasingly, demand for their products continued to grow, and the plant issues this quarter appear to be temporary.
• CBA reported full year cash earnings just under $10bn, coming in better than market expectations. The final dividend announced also came in ahead of expectations. The sheer size of the company means that the next 3 dividend reinvestment plans will plug the capital gap required to meet the banking regulator’s new benchmarks.
• Carsales.com reported strong full year results with revenue growing 8%, driven by its domestic private listing businesses which saw 27% revenue growth. The final dividend rose by 10%. The company is forecasting solid revenue and earnings growth in the new financial year.
• The Aussie dollar fell as the US dollar rose and as fears gripped markets regarding the escalation in US / North Korean tensions.
Economics
• Australian retail sales for June printed ahead of market expectations, which is the 3rd consecutive month of growth. Recent improvements in employment data having some effect. Strongest categories included furniture, footwear / personal accessories, and hardware. Softness was seen in other recreational goods (sports/leisure, media, toys) and department stores.
• Job advertisements rose for the 5th straight month in July, which continues the recent positive employment trends. The unemployment rate has dropped slightly to 5.6%.
• Growth in average personal earnings is at its lowest level since the early 1990s. The RBA has cut its economic growth forecasts for the rest of this year after getting way too optimistic earlier in the year with their forecasts.
• Australian private sector credit grew at a faster than expected rate in June, driven up by business loans and loans to owner-occupiers, as growth in investment housing loans continues to decline.
• Australian consumer sentiment slipped to its lowest in more than a year in August as worries over family finances swamped increasing optimism about the economic outlook.
• US jobs growth strengthened again, creating 209,000 new jobs in July, coming in well ahead of forecasts. Unemployment fell to 4.3%, a 16 year low.
• US consumer credit growth continues to strengthen off the back of stronger employment numbers, even though wages growth remains lacklustre.
Politics
• US and North Korean tensions escalated after North Korea successfully miniaturised a nuclear warhead that could fit inside a missile. President Trump announced that they would pay a heavy price if they continued to threaten the US. Markets didn’t take too kindly to the news. Japan moved their forces to high alert, whilst the South Koreans seemed a little complacent about it all.
