28 Jun 2013
• The Australian market fell earlier in the week before staging a strong recovery off the back of rising global markets.
• The week began poorly with flow on effects continuing from the US’s announcement last week that the stimulus measures will possibly taper off earlier than expected based on improving economic data.
• The negative market sentiment was made worse by news out of China that daily borrowing rates between banks had spiked due to a liquidity issue. The Chinese government then stepped in with a large cash injection to allay fears.
• As the fears of a Chinese banking bubble subsided, we had US GDP (the economic growth rate) for the first quarter revised lower, down from 2.4% to 1.8%. This would normally make markets jittery, but was a positive as it fuelled speculation that the US central bank may hold off on tapering the stimulus measures.
• The Australian dollar dipped down to 91 cents against the US dollar earlier in the week before slowly rising back up to around 93 cents.
• In stock news, Echo (think Star City) launched a $1.1 billion plan for a resort to link harbour precincts. They also urged the NSW government to accept Crown’s plans for Barangaroo.
• Resource stocks were hit earlier in the week as a result of the negative news out of China.
• AMP Limited also fell sharply after the company announced that its 1st half profit may fall by upwards of 15% due to a higher incidence of life insurance claims.
• Metcash (think IGA) released the company’s full year result which was better than the market expected.
• Leighton Holdings won $1.15b contract to build Sydney’s North West rail line - the longest rail tunnels in Australia. This was after Leighton’s won additional work to the value of $1.3b from Fortescue Metals Group.
• Australian government bond yields rose to their highest level in 14 months putting further pressure on the government’s finances.
• We finally had some positive data out of the UK with retail sales bouncing strongly together with other improving data.
• A key US manufacturing survey lifted to a 2 year high and US existing home sales rose to a rate not seen since November 2009.
• We saw more employees laid off in the mining sector during the week. Whilst the unemployment rate has surprised many (i.e. not rising as quickly as expected), corporates have been sharply cutting bonuses, hours worked and wage rates rather than slashing jobs.
• A political party in Greece has pulled out of the ruling coalition leaving the Prime Minister with a tiny majority. The news didn’t help European markets.
• On the Australian front, what can possibly be said….apart from the poor scheduling of a leadership spill on State of Origin night….now that’s just poor form. Even channel 9 dared not show the premier sporting event of the year by telling their viewers to switch to their sister channel (Gem) for continued coverage of the spill.
• The leadership spill was largely no surprise given a poll earlier in the week which showed that Labor were on track to lose up to 35 of its 71 seats at the election.
• Kevin Rudd won the leadership battle by a slim majority of 12 votes, which clearly still shows a much divided federal Labor party.
• One prominent global economist put it best when he said, “Australia has embraced the spirit of environmentalism and chosen to recycle one of its old PMs”, whilst The Times (UK) had the headline “Ditherer vs. ‘Mad Monk’”.
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