30 Aug 2013
• The Australian share market continued its consistent run of a somewhat positive start to the week before falling away towards the end of the week.
• The positive start was due to some solid results as company reporting season continues with most companies either meeting or beating expectations.
• However, the ongoing conflict in Syria escalated with both the US and the UK threatening to launch an offensive strike on the Syrian government and their forces.
• This followed the report that the Syrian army had used chemical warfare (gas) on its own citizens with a large death toll reported. Markets worldwide have traded lower since.
• Asian and emerging share markets stabilised a little following a tumultuous last couple of weeks – they were helped by talk of the US central bank potentially pushing back the 1st round of stimulus cuts.
• Australian company reporting season continued with Crown, Flight Centre, Seven Group Holdings, Qantas, Westfield Group, Westfield Retail reporting strongly, whilst Lend Lease, Caltex, AGL Energy, Woolworths, Metcash results were in line with expectations.
• The Australian dollar continues to hover around the US90 cents mark.
• Oil prices rose strongly over the week given the concerns that a US/UK strike on Syria may cause upheaval elsewhere resulting in a supply shock to oil.
• The oil price rise is also the result of a large drop in Libyan supply with many of the oil fields still offline from the most recent conflict. • Gold rose following concerns of the potential fallout from a western attack on Syria. The price was also helped by some poor US economic data.
• The US central bank held their annual conference in Jackson Hole, Wyoming. Central bankers from the around the world are invited to attend and impart their wisdom. The US central bank chairman was a no-show (planned) and so the conference was really a non-event.
• US new home sales dropped by 13.4% last month (lowest for 9 months), well lower than economists’ expectations and following downward revision of the previous month’s numbers. In contrast, house prices continued to rise strongly.
• US jobless claims also rose more than expected – the recent economic data out of the US is showing that the recovery is not as strong as expected.
• As such, speculation has increased surrounding the US central bank’s planned 1st cut to the stimulus in September – there is now talk that it will either be delayed or a much smaller 1st cut made than was originally expected.
• Manufacturing data globally rose strongly, especially so in China and the Eurozone (Germany) – a positive for global share markets.
• Tony Abbott announced that he has abandoned the intention to return the budget to surplus in the first term of a Coalition government, instead outlining a very ambitious 10 year timetable to return to the budget to surplus….obviously making the confident assumption that the Coalition will be power in for the next 10 years. Good to finally see some long term planning by politicians.
• The Treasury, Finance, and Parliamentary Budget Office (PBO) have taken the unusual step of clarifying their role following Labor claims that the Coalition had a $10bn black hole in their proposals as calculated by aforementioned government departments...
• Not only did Treasury and Finance not do any calculations, the PBO said it was “inappropriate” for a party to claim a costing done for them actually showed the true cost of another party’s policy.
• Political uncertainty is back on the agenda for Italy following ex-PM Silvio Berlusconi’s tax fraud conviction – the conviction means he may be expelled from parliament, thus bringing down the fragile ruling coalition.
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