26 Apr 2013
• The Australian share market posted a solid result this week with the market up around 2%.
• Virgin announced that its takeover of Tiger Airways Australia will not be opposed by the ACCC…following the announcement, Singapore Airlines increased its stake in Virgin to 19.9%.
• The big news for the Australian market this week was Woodside Petroleum declaring a special dividend to be paid in Australian dollars (and fully franked). In addition, they will increase their payout ratio to 80%.
• The market took the news very positively…..but, a special dividend and rising payout ratio can also translate into a mature company with little growth prospects. We’ll have to wait and see.
• The US market suffered a minor blip during week after the twitter account of the AP news service has hacked reporting that the White House had been bombed and that President Obama was injured.
• On release of the news, the US market fell 150 points before recovering to end the day up 150 points….a 300 point turnaround.
• US markets were driven by company earnings as reporting season is well and truly underway…. Heavyweights IBM, McDonalds, and GE missed expectations, but others (Google, Microsoft) picked up the slack to push the US equity market higher yet again.
•Gold rose after a tumultuous couple of weeks, as the price now looks somewhat attractive to patient investors who have been waiting for a correction to buy in.
• The Australian dollar fell as commodity prices continued to fall and the low inflation numbers reported may result in the RBA further cutting rates.
• Moody’s, the credit rating agency, commented that Australia is likely to retain its AAA credit rating despite the Commonwealth budget remaining in deficit for longer than targeted.
• The Chinese have been doing their best to allay fears their economy is slowing too quickly with senior officials talking up growth prospects, with more government spending and proactive fiscal policies.
• Economic figures out of the US continue to disappoint a little as the budget cuts and removal of tax concessions continues to work its way through the economy.
• Euro zone consumer confidence improved, but off a very low base…..though an improvement is an improvement.
• The CPI (inflation) numbers were well below expectations, putting the pressure back on the RBA to potentially lower rates yet again. The lower figure also meant the AUD fell and that yield stocks continued to rise.
• The Federal Government has now blamed the high Australian dollar on their budget blowout….given consensus for that last 1-2 years has been that the dollar would remain above 1 USD (which it has done), I think their ability to budget may be the issue….
• The government did say they would not seek to cut spending….hard to believe given the budget position and their election promise to be “fiscally prudent”.
• Finally some positive news on the Italian political front with the re-election of the country’s president and the support provided to a potentially new PM….only just positive news, but better than nothing.
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