11 Apr 2014
• Total home loan values rebounded strongly in February. The rise was driven by a record level of investors. Construction loan values spiked to the highest level since October 2009 driven by investors.
• The unemployment rate unexpectedly fell to 5.8% from 6.1% in February. Australian job ads data continues to strengthen showing improving conditions in the labour market. Job ads have now been rising for 5 straight months.
• Business conditions locally edged higher in March but remain at subdued levels. Business confidence is now at its weakest point since the September federal election. Mining is still the least confident industry, with services, construction, and retail doing better.
• The US economy added 192,000 jobs in March, just shy of the 200,000 that economists expected. The unemployment rate was unchanged.
• The International Monetary Fund (IMF) has lowered their growth expectations for the world economy to 3.6% for this year (down from 3.7%). They expect the US to grow at 2.8%, China at 7.5%, and Australia at 2.6%.
• UK services exports grew at their fastest ever rate with export sales and orders at record levels in the 1st quarter of this year.
• The Bank of Japan refrained from adding extra stimulus at its most recent meeting even in light of the potential contractionary effects of the sales tax (GST) increase.
• The local share market finished the week higher following positive jobs data and softer rhetoric from the US central bank regarding the timing and speed of potential US rate rises.
• Investors have continued to take profits on high valuation US stocks, especially in biotech and broader technology sectors. Tech stocks worldwide have also been hit. Defensive sectors have fared better.
• European market were largely flat whilst Asian markets rose, with the exception of Japan where tech stocks have been sold off along with concerns regarding the impact of the rise in their GST.
• In stock news, the board of David Jones approved a take-over approach from Woolworths South Africa (no connection to our Woolworths), who own 88% of Country Road. The deal will likely go through given the premium being paid. Myer to miss out.
• Transurban (the nation’s biggest toll road operator) continued its positive run with revenue and traffic numbers up strongly. This follows the regulatory clearance they recently received to acquire Queensland Motorways Group.
• Boral and CSR have announced a $230m joint venture to combine their brick operations located on the east coast of Australia. This will enable both companies to better compete with their main competitor, Brickworks.
• Wesfarmers has agreed to sell the remainder of its insurance division to US based insurance broking giant Arthur J Gallagher and Co in a deal worth $1.16bn. This will mean Wesfarmers has received around $3bn for their insurance assets. What will they do with the cash?
• The Australian dollar continues to trend upwards hitting 94 cents against the US dollar during the week. Positive local jobs data and other economic data are assisting the rise as is a falling US dollar.
• The iron ore price has continued to track upwards approaching US$120 a tonne even in light of the poorer economic data flowing through from China.
• Following 6 months of intense negotiations with the Abbott government, Japan has relented and granted Australian producers unprecedented access to its beef and dairy markets by agreeing to slash tariffs. The trade deal means that tariffs and duties will be reduced or removed on 97% of Australian exports to Japan. Some have argued the deal didn’t go far enough, but it’s a very impressive first step considering how high tariffs were.
• Treasurer Joe Hockey has signalled raising the pension age, more means testing of welfare, and co-payments for government services will feature in next month’s budget. He also flagged that the private sector would play a larger role in healthcare delivery and in areas the government was less efficient. Figures from the IMF show Australia’s healthcare and pension spending will require an extra $93bn a year by 2030 unless action is taken. This is more than the revenue raised by the entire GST.