8 Nov 2013
• The Australian share market finished flat for the week.
• Positive results from the banks pushed the market higher before those gains were pared back with some bank stocks going ex-dividend and some softness in the US share market.
• The same can be said for other global markets with Asian and European markets following the same trend.
• In stock news, the focus of the week was on the Aussie banks with Westpac and CBA posting very strong results following on from NAB and ANZ last week. The strong numbers are all the result of constraining costs and falling provisions for bad loans.
• Coca-Cola Amatil further downgraded its full year earnings guidance as lower than expected post-election consumer demand and increase competition from Schweppes have hurt.
• Harvey Norman also cited lower than expected post-election consumer demand, but said it was looking forward to a bounce in the Christmas trading period. A bigger TV would be nice….
• Twitter had its first day of trading on the New York Stock Exchange with the price almost doubling from its launch price of $26. Twitter is now valued at $25bn.
• The iron ore price has continued to strengthen following positive sentiment regarding stronger Chinese growth. The likes of BHP, RIO and Fortescue have all benefited more recently.
• The Aussie dollar (AUD) continues to trade around the 94-95c market against the US dollar. The RBA noted that the AUD is “still uncomfortably high” and that a lower AUD “is likely to be needed to achieve balanced growth in the economy.”
• The RBA kept the cash rate on hold in a widely expected move. The rate has been at 2.50% for 3 consecutive months now, with the RBA citing signs of a recovery in the non-mining sectors of the economy.
• The Australian residential housing market continues to power ahead with a 1.3% rise across the combined capital cities in October alone. Capital city dwelling values lifted 7.9% over the last 12 months – the fastest pace of growth in 3 years. Sydney prices alone are up 11.6% on this time last year.
• Australian job ads (a leading indicator of unemployment) are now 12% lower than a year ago (a negative), but the downward trends appears to be stabilising for the first time in 3 years.
• Australian retail sales were up in September led by food and eating out and a sharp turnaround in clothing and accessories. Retailers are hoping for signs of spill over from housing to consumption, but this is unlikely given the increased housing market activity is being led by investors, not owner-occupiers.
• The European Central Bank finally cut its cash rate by a quarter of a percent to 0.25%. There have been widespread calls for a cut at the previous 2 meetings given needs to stimulate growth further.
• China’s manufacturing activity expanded at its strongest pace in 18 months, continuing China’s recent run of stronger economic data. US manufacturing activity also rose to sit at a 2.5 year high. Both the Chinese and US results bode well for the global economy.
• The Eurozone unemployment rate held steady at 12.2% in September but has still not yet topped out. The differences between north and south are stark – Germany at 5.3% and Greece north of 27%.
• Treasurer Joe “the axe” Hockey took to tackling our tax law backlog with more than 100 tax proposals dating back to the Howard era still to be enacted. The aim was to clear the decks on tax legislation to assist with boosting certainty for both business and individuals.
• As a result, gone are Labor’s proposed changes to fringe benefits tax on cars, as is the proposed tax on superannuation pension earnings above $100,000.
• The axed taxes, in addition to the Federal Government’s one-time payment to the RBA to replenish their capital base, means the budget deficit will blow out more than 50% since the forecasts released by Treasury prior to the election.
• Treasurer Hockey insists he is still finding “spiders” in every cupboard he opens….someone get the man a can of Baygon…..
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