26 Jul 2013
• The Australian share market rose for the week, opening strongly at the start before small daily increases for the remainder of the week.
• Positive sentiment arose from China’s interest rate reform, a government election win in Japan, and confidence that US stimulus would be unwound carefully.
• European shares have edged up over the last few weeks and are now at eight week highs.
• US company reporting season commenced this week with mixed results so far.
• In stock news, Origin Energy will expand its gas exploration interests after taking a stake in a project off the coast of Darwin.
• James Hardie Industries expects more growth in the US housing market than in Australia and will expand its capacity accordingly.
• Macquarie provided a positive update to the market advising that numbers were ahead of the last two quarters and that the group remains well capitalised.
• Gold has recovered somewhat of late as buyers re-enter the market following the decline since the beginning of the year.
• There’s also upward pressure being applied by gold buyers as concerns that the market has overreacted to the US central bank’s talk of reducing stimulus….meaning that the stimulus reduction may be delayed.
• The Australian dollar continues to hover between 90 and 93 cents against the US dollar.
• Australian inflation numbers were a little higher than expected, however, the annualised CPI rate is still low at 2.1%pa – the lower end of the RBA’s inflation target (2-3%).
• A rate cut at the next RBA board meeting in August is still favoured, but the higher than expected inflation reading will cast a little doubt.
• Further upward pressure is likely on the Australian unemployment rate before year end. Peabody Energy (coal miner) has cut 170 workers – this is in addition to scrapping of plans to fill another 230 positions and follows the cutting of 450 contracting jobs in June.
• Japan has promised to inject more stimulus packages into its economy if China’s slowing growth rate threatens its economic recovery.
• The Chinese central bank announced large changes to interest rate regulations which moves them a step closer to full interest rate liberalisation (which Australia already has). The move will lower companies’ funding costs and boost market efficiency.
• The US housing market continues to power ahead with new home sale up 8.3% in June, well above expectations. Median house prices also rose by 7.4%.
• The Eurozone consumer confidence reading for July rose to its highest level since August 2011.
• Japan’s ruling Abe government in the lower house has also now won a majority in the upper house following the weekend’s much anticipated elections….this gives the Abe government full power to get the much needed structural reforms through parliament.
• Treasurer Chris Bowen’s pre-election economic statement is expected to see Treasury downwardly revise Australia’s growth rate whilst revising the nation’s deficit up…..both are heading in the wrong direction.
• Structural reforms are now needed to rescue the economy which will only happen if the party leading the country post the election has a majority in both houses….we’ve seen the destructive effects of minority governments both locally and worldwide over the last 5-6 years.
• PM Rudd’s tough new stance on asylum seekers has lifted Labor’s ratings to its highest level since the 2010 election. The forgotten….the new policy will likely burn an even bigger hole in the sagging budget and will force genuine refugees to settle in Papua New Guinea, a country with their own very big problems.
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