1 Nov 2013
• The Australian share market had a relatively flat week, consolidating the strong gains of the last couple of weeks. Though the market did manage to break through a 5 year high.
• Australian banking stocks were lower as reports suggesting that APRA (the banking regulator) may look to implement tighter capital requirements on the big 4 banks. This could put pressure on any planned future dividend increases.
• US and European share markets were also flat for the week as there was limited newsflow, most of which was in line with market expectations.
• Asian markets rose strongly as the US central bank again decided to delay the 1st cut to their stimulus measures.
• In stock news, there’s been a flurry of activity (and press) in the milk and cheese sector as the bidding war intensifies for Warrnambool Cheese and Butter Factory. Murray Goulbourn, Saputo (large Canadian dairy giant), and Kirin (Japan) all in the fray along with Bega Cheese and Fonterra (NZ dairy giant)…..who knew cheese could be so good!
• ANZ and NAB reported their full year results. Numbers were strong, but largely as expected. Both raised their final dividend quite considerably.
• ResMed (provider of sleep apnoea and other sleep therapy products) fell more than 8% after reporting a profit increase of 9% over the quarter…..a reminder that share prices can fall following positive results if a stock is priced for perfection.
• Oil prices continue to fall and are near 4 month lows…..no doubt you would’ve realised cheaper prices at the bowser over the last couple of weeks.
• The Aussie dollar eased from last week’s highs of 97c against the US dollar and seems to be settling around the 94-95c mark. Now may be a good time for an overseas holiday given the Aussie dollar is expected to fall over the coming 6-12 months.
• Swiss investment bank UBS’s local economics division sees Australian’s economic growth improving in 2014 and 2015. They also think that the unemployment rate will peak at 5.9% in early 2014 and see the RBA on hold for an unusually long time (end of 2014). Our views aren’t too dissimilar.
• Even with the Australian Federal Government raising the debt ceiling from $300bn to $500bn, the Commonwealth general government debt will remain low versus overseas and there is little risk to Australian losing its much revered AAA credit rating.
• Australian business conditions for larger companies plunged in the last quarter to their lowest level since 2011, but confidence rebounded into positive territory.
• The RBA Governor, Glenn Stevens, downplayed fears of a property bubble saying some rise in house prices is part of the normal cyclical conditions.
• Total new home sales hit a 2 year high in the last quarter. New home sales rose at the fastest monthly rate since April 2012 and were mainly the result of new unit sales.
• US consumer sentiment fell to a 10 month low in October, well below expectations.
• US housing data continues to show signs of slower growth than earlier in the year. However, a key home price index currently stands 12.8% higher than a year ago. The housing market recovery is very important to the US’s economic recovery.
• The political front was reasonably quiet this week, which is always a good thing. Less is more when it comes to government.
• Manufacturing was back on the agenda as Industry Minister Ian Macfarlane issued a blunt warning, whilst on travels through Japan, that cutting subsidies to car makers would result in the car industry disappearing altogether from our shores. Loss of jobs is never a good thing, but maybe the money spent on subsidies can be more productively used elsewhere.
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