8 Mar 2013
• The Australian share market will end the week slightly up on last week – largely on the back of a positive reporting season.
• The market had a bit of a wobble earlier in the week due to China’s decision to tighten restrictions on housing finance – resource stocks were the hardest hit.
• During the week the US equity market hitting all-time highs, European stocks hit their highest level in 4.5 years, and the ASX200 rose to its highest level since Sept 2008.
• Company reporting season was solid with the strategy of cost cutting being the main driver of earnings….the cost cutting can only continue for so long, but is likely to be a consistent theme over 2013.
• Putting cost cutting aside, another theme from reporting season was positive outlook statements (mainly looking at the 2nd half of 2013) by companies who reported.
• Most of the upgrade in company earnings flagged for 2013 has come from the Financial sector, following on from solid results from the banking sector.
• The Australian share market is now trading broadly in line with its 20 year average – whilst some commentators are concerned, the market could continue to move higher again this year, but it won’t be a straight line up and company earnings will need to pick-up in the 2nd half of this year.
• The RBA decided to leave the cash rate unchanged at 3%, and while it retained its easing bias (i.e. more likely to lower rates than increase them) – they are employing a wait-and-see approach.
• Given the expectations for more cost cutting by companies over the 2013, economists have been increasing their expectations of a pick-up in the unemployment rate.
• US jobless claims have been falling over the last few weeks…a positive for the US economic recovery with flow through effects of confidence to the rest of the world.
• China has set its 2013 economic growth target at 7.5%, unchanged from last year’s. China’s economy grew at 7.8% in 2012, its worst performance in 13 years.
• On the Australian front, Federal Treasurer Swan provided some guidance on just how much the budget had slipped from their long-held commitment to a 2012/13 budget surplus, which was officially abandoned last in Dec last year – budget has slipped about $4bn since then and into deficit.
• Current economist estimates have the 2012/13 budget deteriorating to a deficit of $10bn-$15bn, which means achieving surplus in 2013/14 is likely to be difficult in an election year without more tightening of policy (further budget cuts).
• It’s been a quiet one for Federal politics which has been overshadowed by Victorian state politics with the sudden resignation of the Victorian premier….party in-fighting and factional disagreements at the fore… just another day in politics.
As always if you would like to discuss this weeks wrap please feel free to contact your Financial Planner on 02 9324 8888 or firstname.lastname@example.org