5 Jun 2015
- The Australian share market fell, closing lower on each of the trading days this week. Stronger falls were seen in bank and mining stocks, whilst the stronger than expected economic growth number confused markets (i.e. strong headline number, weak components).
- The US market fell as worries over Greece and mixed economic data weighed on investor sentiment. European and Asian markets (ex-China) also fell.
- China’s stock market suffered one of its biggest falls this year before staging a dramatic recovery, adding to a week of large and sudden moves amid concerns over a clampdown on lending to investors.
- In local stock news, wholesale distributor Metcash fell sharply after management announced larger than expected write-downs, and the cancellation of their dividend for the remainder of FY15 as well as FY16 in order to shore up their balance sheet.
- The Australian dollar fell earlier in the week before rising on the back of stronger than expected economic growth numbers.
- Oil prices fell ahead of an OPEC decision which is likely to keep the market oversupplied. Recent data also showed a slow-down in the US oil rig decline.
- The Australian economy grew faster than forecast last quarter as newly built mines boosted exports and household spending advance. However, all other components fell, and 70% of the decline in mining investment is still to make its way through the economy.
- Australians saved the least since the GFC last quarter, helping the economy to grow faster than expected even as business investment waned. The nation’s saving ratio fell at a time when wages also fell, placing household balance sheets under further strain.
- The US economy contracted in the March quarter by a revised 0.7%. The original number was an anaemic 0.2% gain, with revision expectations actually worse (-1%) than the final number.
- The US private sector added 201,000 jobs in May, well above the number seen in April. A sign that hiring may be picking up again.
- In other mixed US data, a key manufacturing index fell as did productivity, whilst consumer sentiment rose.
- The Greece negotiations are now down to the wire, with each side serving the other with proposals after Greece’s creditors reached an agreement (amongst themselves) on a deal to provide more aid. The main sticking point is the requirement for Greece to continue running a budget surplus, which is clearly unworkable. The Greeks responded by refusing to make a 300m euro loan repayment to the IMF due today, which will likely result in creditors refusal to release further aid funds.
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