8 May 2015
- The Australian share market fell as the financials sector sold off led by the banks, which reported weak quarterly earnings numbers, announced capital raisings and failed to fully pass on the RBA’s rate cut.
- US stocks also fell following the Fed’s Chair Janet Yellen outlining her beliefs that the US equity market looked overvalued.
- The Chinese share market fell sharply following concerns of further regulation to curb the recent share market enthusiasm. Asian markets followed suit.
- European markets fell as concerns mounted regarding Greece’s ability to meet upcoming debt repayments.
- In local stock news, Westpac’s first half result disappointed missing market consensus. Cash earnings were anaemic and dividend per share actually came in below market consensus (the first time in a long time a bank dividend has disappointed). Provisions for bad and doubtful debts remained at all-time lows and the bank has introduced a dividend reinvestment plan (DRP) discount and will partially underwrite the DRP in order to raise circa $2bn.
- ANZ also reported, beating market consensus and delivering a stronger earnings growth than Westpac. However, ANZ lifted their bad and doubtful debt charge. The bank will also introduce a discount on their dividend reinvestment plan (DRP), but will not underwrite the DRP.
- CBA came out with their quarterly update, missing market consensus, with cash earnings lower than the previous quarter. They chose to only pass on 0.20% of the RBA’s 0.25% cut, whilst two of their peers followed suit. A sign that banks’ net interest margins (difference between the rates they lend at versus what they pay on deposits) are at risk.
- NAB has announced a rights issue (equity raising) at an offer price of $28.50 to raise approximately $5.5bn. The raising will be used to boost local required capital whilst assisting in the listing of their UK business. The bank’s net profit for the half year was up 20% to $3.44bn.
- BHP shareholders voted unanimously in favour of spinning out non-core assets into South32. The resolution saw 98.05% of shareholder vote in favour of the demerger.
- The Australian dollar surprised everyone by rising against the US dollar. An interest rate cut should result in a fall of the currency, but the market noticed some key words missing from the RBA’s statement and took that to mean that this may be the last cut from the RBA.
- The RBA cut rates a further 0.25% to 2% this week citing weak conditions ahead, low inflation and an Australian dollar which is still too high. The RBA might just have one more cut in them depending on data over the next couple of months.
- The unemployment rate rose to 6.2% meeting economist expectations. The number of people with jobs fell 2,900 against expectations of a rise of 10,000. Safe to assume expectations were well and truly out of whack given underlying conditions in the economy.
- Australian building approvals lifted by 2.8% in March representing a new record high with 19,419 approvals. The increase was driven mostly by apartment and townhouse approvals.
- The US trade deficit rose 43% in March to $51.4bn, well above the gap expected by economists. The rise was driven by a 7.7% rise in imports as labour disputes at West Coast ports dissipated. The data may lead to a downward revision in first quarter GDP (economic growth) which came in at 0.2%.
- Other US data was quite poor with the private sector adding a much smaller than expected number of jobs and productivity continuing its recent run of falls. However, job losses were lower than expected.
- We saw positive economic data out of the Eurozone with German manufacturing data revised upwards and Eurozone manufacturing employment increasing at the fastest pace in four years. Depreciating your currency will do that.
- It was quiet on the Australian political front as we head into the handing down of the Federal Government’s budget next week.
- Greek MPs passed a law to give back jobs to some 4,000 workers who were laid off under severe austerity cuts previously. Greece is running out of money as it has to pay $845m to the International Monetary Fund on the 12th of May. This follows the deadline they met this week for a $285m repayment.
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