16 Mar 2018
Wesfarmers to spin-off Coles
Markets
- The local share market finished lower this week whilst global markets were mixed.
- Amazon Inc’s share price hit a record high this week. The company has added US$300bn in market capitalisation in the past 3 months.
- In local stock news, Wesfarmers have announced they will be demerging Coles whilst retaining a 20% stake in the newly listed entity. The demerger will give Wesfarmers more capital to re-invest into its other businesses given Coles is one of its lowest margin businesses.
Economics
- An index of Australian business conditions climbed to record highs in February as sales and profits increased sharply. Business confidence fell whilst firms’ demand for labour rose strongly.
- A US budget deficit of US$215bn was recorded in February, the biggest in 6 years. Hardly surprising given Trump’s fiscal expansion. Revenue dropped whilst spending rose.
- US Labour Department data showed a 313,000 jobs increase last month, the biggest monthly increase in more than 1.5 years. However, average hourly earnings rose only 0.1% compared with a 0.3% rise in January. No pressure on inflation here.
- The US consumer price index rose a modest 0.2% in February following January’s 0.5% decline. The annualised figure edged up to 2.2%.
- US retail sales declined for the 3rd straight month, which is the first string of declines since April 2012.
- China is giving its central bank the power to write the rules for the financial sector as part of a sweeping overhaul aimed at closing regulatory loopholes and curbing risk in the $43 trillion banking and insurance industries.
Politics
- North Korean leader Kim has committed to denuclearisation and offered to hold the first ever US-North Korea summit.
- President Trump fired his Secretary of State Rex Tillerson via Twitter after a series of public rifts over issues including North Korea and Russia. Tillerson’s removal follows the recent resignation of economic adviser Gary Cohn. Tillerson and Cohn were probably the last sensible people left in the White House.
- President Trump is pressing China to cut its trade surplus with the US by $100bn…..US businesses and consumers want / need these goods and will need to source them more expensively from somewhere else. Negative for US economic growth and inflationary.
- China’s parliament has passed historic constitutional changes that abolish term limits to let President Xi Jinping rule indefinitely. There were 2 no votes and 3 abstentions in the 3,000 votes cast by party delegates. The move repeals the changes made in ’82 to prevent lifelong dictatorship.
- UK PM May has stated that it’s highly likely Russia was responsible for the attempted murder of a former Russian double agent and his daughter on UK soil. The Russian ambassador has been summoned to explain the attack. May has indicated that no credible response will result in the conclusion of an unlawful use of force by the Russian state against the UK.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here
