11 May 2018
U.S unemployment hits 18 year low
Markets
- Local and global equity markets finished higher this week.
- The profit margins of the 500 largest listed US companies rose 11.6% in the 1st quarter, their highest level in history.
- Apple Inc. jumped to record high share price, pushing the size of the company to closer to US$1 trillion, after Warren Buffett’s Berkshire Hathaway disclosed it had raised its stake in the iPhone maker. Last week’s quarterly result was stronger than expected.
- In local stock news, Macquarie Group announced a 15% lift to their full year profit to a record $2.56bn. The company expects to report a similar profit next year.
- Westpac reported a strong half year result, lifting cash profit by 6% on the same time last year. Revenue, return on equity, and their margins all rose in the half. Loan quality remained sound.
- Commonwealth Bank’s 3rd quarter result was relatively weak with cash profit down as a result of rising compliance and regulatory costs. The bank was also ordered to pay ASIC $25m to settle a legal stoush with the regulator.
- A further 3 board members of AMP Limited resigned prior to the company’s annual general meeting (AGM), with one still holding out. The AGM was a fiery affair, with shareholders voting against the executive’s remuneration report. One more shareholder vote against the company would force a full board spill.
- The oil price hit 3½ year highs, as the market fretted about supply with economic issues in Venezuela and the potential for new sanctions on Iran as President Trump refused to sign the Iran nuclear deal.
- The Aussie dollar fell earlier in the week against the US dollar, to be down more than 8% since earlier in the year. Initial moves were due to rising US bond yields, however more recent moves relate to concerns regarding the underlying strength of the local economy.
Economics
- Australian business conditions jumped in April, according to a key index, to the highest level since the survey began in 1997. Business confidence rose, whilst conditions increased in all industries except for manufacturing and retail. Conditions in mining were the strongest.
- The US central bank left rates unchanged, acknowledging inflation is closer to target, but lowering expectations of a faster pace of rate hikes.
- The US unemployment rate dropped to 3.9%, an 18 year low, after the US economy added 164,000 jobs in April. However, pressure on wages remains subdued as shown by April’s mere 0.1% rise in wages.
Politics
- US negotiators weren’t able to secure a trade agreement with China after two-day talks. Apparently, talks were positive, but more negotiations would be needed to avert any further escalation.
- US President Trump said the US will withdraw from a 2015 Iran nuclear agreement and also reinstate sanctions on the country. The move angered many, especially the Europeans, who worked hard to broker the deal in the first place. Iran has threatened to restart nuclear activities immediately, whilst Trump isn’t averse to signing a new deal.
- Italian talks collapsed amongst the biggest political parties, who have been trying to form a coalition since the election in March, following a hung result. The prospect of new elections has risen.
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