7 Nov 2014
- Markets received a boost as the Bank of Japan announced an increase to stimulus measures already in place as well as changes to the asset allocation (buying more equities) of the Government’s massive pension fund.
- Unsurprisingly, the Japanese stock market hit 7 year highs, whilst the Yen hit 7 year lows against the US dollar.
- US and European markets pushed higher, whilst Asian markets fell as the falling Yen will hurt Asian exporters’ competitiveness.
- Strong results from the Aussie bank majors helped propel the local market higher before the fall in resource stocks took those gains back. The banks have delivered average earnings per share growth of 10%, largely benefiting from the falling Aussie dollar and lower bad debt charges (now at the lowest level ever recorded).
- In local stock news, ANZ announced a solid set of full year results for 2014. Profit was up 10% and the full year dividend was up 9%. Westpac provided a similar result.
- Macquarie Group announced a half-year profit increase of 35% on the same time last year. The increase was stronger than expected, mainly due to the timing of performance fees received on their infrastructure operations.
- Woolworths delivered lower than expected 1st quarter sales after softer trading in September and October. Sales (ex-petrol) were still up 4.1% for the quarter. The market wasn’t impressed especially given strong recent numbers from key competitor Coles.
- The rising US dollar resulted in falls for the price of gold and oil (both measured and transacted on a US dollar basis). The Aussie dollar also traced lower, now hovering around the 85c mark.
- Australian housing credit continued to increase during September. Owner occupied housing credit is now up 5.5% for the year, the highest since early 2012. Investor housing credit is showing the highest annual growth since 1st quarter of 2008.
- Building approvals plunged in September down 11%, falling well short of expectations.
- However, dwelling prices rose 1% in October, showing a strong 8.9% year on year growth, led by Sydney.
- Australian employment numbers rose strongly in October, reversing September’s fall. However, they weren’t strong enough to bring the unemployment rate down, which remained steady at 6.2%.
- Australian retail sales reversed their recent softness, jumping 1.2% in September, the strongest monthly gain since early 2013. The jump was driven by continued strength in ‘eating out’, improvement in still weak department stores, and surge in household goods (ie. new iPhones).
- The number of job advertisements has risen for a 5th consecutive month. Job ads on the internet and in newspapers were slightly higher in October, and up 7.5% for the year.
- The Bank of Japan announced it will buy 80 trillion Yen of government bonds each year, up from 60-70 trillion Yen, as they attempt to stoke inflation and devalue their currency.
- US consumer spending was down in September, against expectations of a rise. Incomes were largely flat, leading to a tame inflation reading. No pressure on US interest rates just yet.
- The Republicans retook control of the US Senate and extended their majority in the House of Representatives following mid-term elections. President Obama’s job just got much harder given he’s a Democrat.
Chief Investment Officer
PSK Financial Services