2 Dec 2016
US consumer makes a comeback
Markets
- The tech-heavy NASDAQ market in the US hit all-time highs this week on the back of improved US economic data.
- The US market finished the week a little softer, given the strong run of late, as investors looked to take profits.
- The Aussie market followed the US, Asian markets were up, whilst European markets were mixed.
- In local stock news, rumours are circulating in the British press that UK bookmaker Ladbrokes is weighing up a bid for Tabcorp. It appears they been forced to bring any potential bid earlier given Tabcorp’s proposed $6.4bn acquisition of Tatts Group. Ladbrokes is only interested in Tabcorp.
- Aristocrat Leisure eclipsed market expectations by posting a 69% surge in underlying net profit. Revenues rose 35% for the year. The numbers were boosted by their acquisition of US group Video Gaming Technologies. The company expects continued growth in the 2017 financial year.
- Medibank Private CEO Craig Drummond has warned revenue in the first 4 months of the financial year is below expectations. A combination of market conditions and poor management over the last few years. The CEO’s key objective is to put the customer first (something he learnt from his background in banking) and to stabilise the business within the next 2-3 years.
- Aussie dollar is currently experiencing both upward (commodity price strength) and downward (US dollar strength) forces, thus movements will be range-bound in the near term.
- The countries forming the oil producing cartel OPEC agreed to production cuts for the first time in 8 years. The agreement will see a combined 1.2 million barrels per day cut from production, which is contingent on non-OPEC producers also cutting 0.6 million barrels per day (half of which would come from Russia). The market now awaits action and proof.
Economics
- US had Black Friday (bricks & mortar sales) and Cyber Monday (online sales) shopping sprees, with very strong numbers reported. $3.34bn was spent on Black Friday and $3.45bn on Cyber Monday, the latter setting a new record. The US consumer is back.
- US 3rd quarter economic growth was revised higher, whilst US home prices lifted to their highest level in 5 years. This all comes on the back of increasing consumer confidence.
- European Central Bank President Draghi warned that the greatest risk to the Euro area came from weak growth and warned that a long period of low rates is a fertile ground for instability.
Politics
- The Italian referendum takes place on the 4th December where citizens will decide on whether to vote through a raft of constitutional reforms centring on shifting power into the lower house of parliament so that the people can be better represented. Polls are indicating a NO vote, which may result in the Prime Minister’s resignation and potential early elections for Italy.
- The second round of the Austrian Presidential Election is on 4th December, and for the first time in 50 years, the President will not come from either of the large parties. Instead it will be the far-right Freedom Party or the Greens. The President has the power to appoint the Prime Minister, federal cabinet ministers, Supreme Court justices, military officers, and most major bureaucrats.
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