9 Aug 2013
• PM Rudd finally set a date for the federal election (7th September in case you missed it)….let the popularity contest begin.
• Treasurer Chris Bowen resorted to blaming the budget shortfall on lower than expected economic growth…not sure that’s the full picture….some poor modelling/forecasts and frivolous spending might be some other avenues to consider.
• He also outlined $17.4 billion in savings….the word “savings” in the political context means the provision of less services and higher taxes.
• A breeze of desperation “crept” into PM Rudd’s election campaign with the statement that he has placed trust and economic management at the heart of Labor’s campaign. He also claimed the underdog status to garner some more support….
• PM Rudd also made an appeal to “people power” to keep Tony Abbott out of the lodge…how did he do this…..by appealing for donations (lack of campaign funds) and volunteers (lack of support).
• The Australian share market had a slow start to the week before being oversold on Wednesday and recovering on Thursday, with the market most likely finishing lower for the week.
• The fall midweek was due to further talk from US central bank members that the stimulus may be pulled back sooner than previously flagged citing better data than expected.
• Mixed US economic data put a halt on the recent stellar performance of the US equity market. However, company reporting season is now over and 65% of companies beat analysts’ forecasts.
• Asian markets continue to struggle with Japan also down for this week.
• In stock news, Virgin Australian Holdings (aka Virgin airline) expects to report a loss of nearly $100m. The company cited a range of issues but the main points were the fall in the Aussie dollar hurting international travel and getting into a price war with Qantas….Virgin referred to it as “competitive pressures”.
• Australian reporting season has begun with Cochlear result in line with guidance, Downer EDI’s just above, 21st Century Fox (News Corp cable TV spinoff) posted a sharp lift in full year profit, and both Telstra and Rio Tinto’s results were in line with expectations.
• The Aussie dollar held up reasonably well this week following the Reserve Bank of Australia’s decision to cut interest rates by a further 0.25% to 2.50%.
• Locally, the budget update revealed that unemployment is expected to rise higher than that during the GFC….finally a forecast that’s difficult to get wrong.
• Retail spending has fallen to its slowest growth rate since July 2000 and activity in the services sector reached its lowest level since the GFC.
• Domestic house prices jumped 2.4% in the second quarter (the sharpest rise in over 3 years), whilst job advertisements fell again in July (the 5th consecutive decrease) indicating further employment weakness.
• Activity in Australia’s construction sector has fallen for the 38th consecutive month, but the pace of decline is slowing.
• The US unemployment rate fell to its lowest level since the end of 2008….whilst definitely a positive, the unemployment number doesn’t consider those who aren’t looking for work or those that are forced into part-time employment.
• Other US data was mixed with new jobs added below expectations, only a small rise in incomes, and lower factory orders than expected.
• The European Central Bank and the Bank of England both re-iterated their intention to maintain lower interest rates to boost growth.
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