6 Sep 2013
• The Australian share market again continued with another consistent week – a strong Monday and Tuesday, before falling away to end the week unchanged.
• The fall was due to increasing concerns regarding military action against Syria which have filled the news headlines for much of the week.
• President Obama now has in principle support from Congress and also the support of France and Turkey. Britain’s support was lost….more on this below.
• Overseas markets held up well for the week led by Asian markets. The US and UK share markets were a little choppy given concerns regarding an impending military strike, but will most likely finish flat for the week.
• Asian markets stabilised this week with many commentators allaying concerns of another 1997-style Asian financial crisis – Asian countries are in much better shape than they were leading into 1997.
• In Australian company reporting, Harvey Norman produced a strong result as did Qantas.
• The numbers may be scarily large with UK telecom firm Vodafone agreeing with Verizon (US) to sell its 45% stake in the Verizon Wireless joint venture for $130 bn – corporate activity is definitely picking up globally.
• Microsoft Corp agreed to buy Nokia’s mobile handset unit for AUD$8bn as Microsoft pushes ahead with plans to compete with Apple and Samsung.
• The Syrian conflict has pushed both gold and oil higher this week.
• The Australian dollar has remained around the US90c mark for this week putting more pressure on the RBA to cut rates.
• US economic data returned to positive territory this week with 2nd quarter economic growth revised upwards, initial jobless claims edged lower, and inflation remained very tame.
• Japanese inflation has continued to rise whilst their unemployment rate has fallen to 3.8% (very difficult, if not impossible, to fire a worker in Japan).
• European and UK manufacturing data was very positive, with a key UK manufacturing data rising to a 30 month high. China’s manufacturing sector also expanded strongly.
• Meanwhile manufacturing activity in Australia fell for the 26th consecutive month in August – the only positive was that the rate of decline is slowing.
• Australian credit growth in the private sector continued at an anaemic rate as did retail sales.
• Locally, building approvals jumped over 10% in July beating expectations for a modest rise, whilst the rate of inflation slowed to a crawl.
• Australian economic growth was as expected for the 2nd quarter putting less pressure on the RBA to cut rates. However, the high Australian dollar and muted inflation mean the RBA still has room to move.
• Some of the pre-election headlines have been filled with the potential showdown between both sides over the carbon tax. The Coalition will remove the carbon tax if elected, but they don’t have the numbers in the Senate as current senators retain their seat until mid 2014. The Labor party has vowed to block any moves, likely forcing the Coalition to call a double dissolution election.
• The Coalition has claimed that the budget bottom line will be more than $6bn better off over 4 years if elected – modest savings, and the surplus won’t be returned any sooner than the Labor government’s forecast. Strong economic management is not about a surplus, it’s about spending and saving in the right areas to enhance the productive capacity of our great nation.
• The British PM suffered an embarrassing defeat when he re-called British parliament to vote on military action against Syria – a comedy of errors with 30 of his own party voting against the action and many more didn’t even show up (remained on holidays)….someone forgot to make sure they had the numbers, just a small oops.
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