7 Jun 2013
• The Australian share market moved lower again this week and is now at levels not seen since the beginning of the year.
• The fall in the Australian dollar has spooked global investors who have been investing in the Aussie market.
• In addition, the Aussie market has been trending lower in line with global markets given some concerns that the US central bank (The Fed) may reign back in their stimulus package sooner than expected.
• The confusing thing is that this is all the result of a strengthening US economy which should assist stock prices….however the reverse is happening.
• The Aussie dollar suffered a few more drastic daily falls but has been trading in the 94 to 96 cents range against the US dollar.
• The iron ore price continues to fall, hitting a 7 month low this week. The fall is long overdue and most long term forecasts have the iron price lower than it currently is…BHP and RIO still very profitable even at those levels.
• Global bond markets (that’s specific to government bonds only) posted their biggest monthly losses in 9 years in May …..the result of strengthening US economy which means less stimulus.
• In stock specific news, Cochlear reported a large slowdown in sales in the 2nd half of this financial year and the market punished with stock down more than 20% soon after report. The stock has since rebounded clawing back some losses.
• Telstra also fell as concerns mounted regarding their potential liability to asbestos.
• The Reserve Bank of Australia left the cash rate on hold after the previous month’s 0.25% cut – the fall in Aussie dollar was the main reason for leaving rates unchanged, but they did flag the potential for more cuts to come given the slowing Australian economy.
• The manufacturing sector in Australia continues to deteriorate with a key measure recording its lowest reading since June 2009.
• The manufacturing sector in China is also slowing (maybe surprising to some) with lower demand for goods and higher wages being the main factors.
• Company gross profits in Australian rose in the March quarter well above expectations whilst retail sales were also higher.
• US economic growth continues to power ahead with consumer spending estimates revised upwards and consumer sentiment at its highest level in 6 years.
• This was tempered by a slight rise in jobless claims (seasonal), but we also saw US home sales up again in April to the highest level in 3 years.
• The NBN (National Broadband Network) fiasco continues with construction of the wireless section so far behind that less than half the planned homes/offices will be connected by June 30.
• NBN Co has blamed tall trees and a lack of accurate addresses….like the dog that ate my homework…..
• Labor has finally asked the unions to produce evidence of rorts and malpractice in the 457 visa program (i.e. foreign workers) rather than just relying on their word…
• Former Treasury secretary Ken Henry has said that Australia is ill-prepared for the downturn in the mining boom because it failed to continue with reforms from the 80s and 90s. He suggested that company and personal tax rates need to be cut, with greater tax revenue coming from the GST (i.e. consumption).
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