16 Oct 2015
- Shares globally were mostly higher on the back of the M&A activity in the US.
- Europe bucked the trend and finished lower due to the big fall in Chinese imports (Europe exports a lot into China) and a very poor German economic sentiment reading, no doubt impacted by the Volkswagen scandal.
- Two big takeovers were announced in the US with Dell and a private equity partner taking over EMC Corp for US$67bn, and Anheuser-Busch Inbev taking over SABMiller (subject to regulatory approvals) for US$104.5bn to create the world’s largest brewing company. The latter deal includes a US$3bn break-free if the deal collapses. The combined company will own one out of every three beers drunk worldwide.
- In local stock news, Telstra was hurt by the ACCC’s decision on the prices that other operators pay to use the company’s copper network. The decision means that access prices will fall 9.4%, a $430m hit to Telstra’s bottom line.
- Westpac announced a rights issue for $3.5bn at $25.50 per share following their results announcement. Not surprising given all their peers have already raised new equity. Westpac also announced they will be lifting rates on property loans (both owner occupiers and investors) by 0.20%.
- National Australia Bank has entered into an agreement with Japanese life insurance company Nippon Life, which will most likely see NAB’s life insurance book sold to Nippon with some sort of preferred supplier arrangement thereafter. The deal would make sense for both parties.
- CSL has confirmed it will be launching a $1bn share buy-back program over the coming year. This follows the company’s already completed $950m program. The programs are aimed at increasing their gearing, which is currently very low and shoring up shareholder returns.
- Speculation is rife that the RBA may be forced to cut the cash rate in light of Westpac’s decision to raise rates out of cycle. Consensus was building that the RBA might need to cut rates in the first half of next year as the economy slowed further, but the timeframe for this may now be brought forward.
- Australian employment declined by 5,100 jobs in September, which was much lower than expectations for a 10,000 job increase, following an 18,000 increase in August. Full-time employment declined by 14,000 jobs, which was partially offset by a 9,000 rise in part time work. The unemployment rate held steady.
- US inflation data fell in September from the previous month due to low oil prices. Core inflation, which excludes volatile food and energy costs, was up in the month, bringing core inflation up to 1.9% over the year. The reading means less pressure on a US rate rise.
- The Chinese have effectively launched their own version of quantitative easing (QE). The Chinese central bank announced that it would expand a pilot program on bank lending from two to nine provinces, which allows banks to pledge assets to secure central bank lending.
- China’s trade surplus widened against expectations of a narrowing (i.e. improving). The big difference was exports, which only fell 1.1% in the month against expectations of a 7.4% fall. Imports were sharply lower, mostly as expected, with Australia (-26%) and NZ (-34%) quite heavily impacted.
- Rather than writing about the trivialities of where PM Turnbull invests his wealth, here is a powerful video of President Obama immediately following the recent mass shooting in Oregon.
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