28 Aug 2015
- Markets globally came under strong selling pressure early in the week as the Chinese share market sell-off continued following deepening doubts about the government’s ability to get the economy back into gear.
- Investors were spooked by global growth fears on waning Chinese economic growth, which has held up the global economy since the global financial crisis.
- The panic selling subsided as investors realised there was no real change in fundamentals. Strong buying followed suit, with most markets recouping early losses and some pushing higher for week.
- In local stock news, Santos announced a full strategic review following the resignation of long serving CEO David Knox. The company’s first half results were impacted by significantly lower oil prices and a higher exploration expense. However, there was strong operational performance from PNG and Darwin LNG, with production growth up 13% on last year.
- Woolworths has bowed to pressure from shareholders and announced a new Chairman. The previous Chairman presided over the last two questionable CEO appointments and their failed supermarkets strategy. The move came as the search for a new CEO continues. The company announced a 13% fall in net profit on flat revenues. The final dividend was retained.
- BHP reported a solid full year result, with earnings ahead of market expectations. The company also announced further cuts to capital expenditure, a continued commitment to their progressive dividend policy, and focus on improving cashflows.
- Global growth fears saw oil fall below US$40 a barrel for the first time since 2009. However, a bounce in confidence saw the oil price recover and finish higher for the week.
- The world’s two biggest iron ore exporters, Australia and Brazil, are expanding sales into China, winning a greater share of trade as prices tumble. Cargoes from Australia to China rose 13% in the year to date. The figures show that miners in Australia and Brazil are building market share.
- The Australian dollar fell to 71c against the US dollar on concerns for the Australian economy given the slowdown in China and falling commodity prices. The AUD is back to trading like a commodity currency.
- Construction work done in Australia has rebounded in the June quarter, above market expectations, after declining at a faster pace than predicted in the March quarter.
- The US economy expanded at 3.7% in the second quarter, according to revised data. The reading was well ahead of the initial estimate (2.3%) and above economists’ expectations. The increase was driven by revisions to business investment, inventories, and government and consumer spending.
- US consumer confidence rose strongly in August, according to a key data point, which is now at its second highest level since the end of the GFC.
- The Chinese government acted to stem the share market rout, cutting interest rates by 0.25% and reducing bank capital reserve requirements by 0.50%.
- Chinese manufacturing data came in below expectations in August. The key reading is now nearing a 6.5 year low, caused by weaker demand from Europe and weaker currencies in trading partners.
- The Greek President appointed the head of the country’s Supreme Court as a caretaker prime minister to lead the country to next month’s polls, after parliament’s three largest parties failed to find willing coalition partners. Ex-prime minister Tsipras is expected to win the election, but it is unclear whether his party will secure enough seats to govern alone.
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