24 Jul 2015
- US shares fell as some key companies announced weaker earners than the market expected.
- European markets pushed higher earlier in the week as Greek banks re-opened on the support of the European Central Bank (ECB), and European Union officials finalised a plan to provide bridge financing in order to meet obligations to the ECB and the IMF.
- However, the gain was short-lived as US corporate earnings disappointed and falls in commodity prices weighed on sentiment.
- The Australian market mirrored overseas market movements.
- Chinese stocks pushed higher on continuing efforts from the Chinese government to stabilise the market. Reports also showed the Chinese government had injected over $100bn of capital into three key banks.
- In local stock news, BHP released its quarterly production report with iron ore production coming in ahead of market estimates. BHP now expects to ship 270 mega tonnes in FY2016, with unit costs falling to US$16 per tonne. Petroleum and coal production were higher, whilst copper was in line with estimates.
- Santos released their quarterly activities report to the end of June with higher production and sales volumes, as well as significant reductions to both capital and operating expenditure. Sales revenue fell, affected by the lower realised oil price. However, this was partially offset by higher domestic gas prices and a weaker Australian dollar.
- ANZ announced that interest rates to residential property loans will increase to manage investor lending growth targets. Variable rates for investment property loans will rise by 0.27% whilst fixed rates will rise 0.30%.
- Gold prices tumbled to a five year low as the US central bank moved closer to the first rate rise, thus putting upward pressure on the US dollar. In addition, the Chinese released data showing they had purchased much less gold than expected.
- The Australian dollar moved higher earlier in the week on the back of stability in the Chinese equity market, before falling away following comments from RBA Governor Stevens that trend growth in the economy remained weak. Their easing bias looks set to continue.
- APRA, the Australian banking regulator, announced new rules which will force the big four banks to increase the capital levels they hold against their residential mortgage books, thus crimping returns. At this stage, raising equity seems unlikely.
- Australian inflation data showed the CPI running at 0.7% for the quarter and 1.5% over the year. The headline number was heavily influenced by the largest quarterly rise in petrol prices since 1990. The concerning number was the lack of inflation in tradable goods and services given the falling Australian dollar. This gives the RBA plenty of room to cut rates further.
- Positive US economic data and rhetoric from key members of the US central bank have pushed the probability of a September rate rise back up above 50%.
- US existing home sales rose 3.2% in June to levels not seen since February 2007.
- The Greek parliament voted through the second round of key reforms as required as part of their bailout package. The reforms were only voted through with assistance from opposition parties, bringing PM Tsipras closer to facing a potential no-confidence vote. Tsipras also reshuffled key positions in his ministry, removing dissident ministers to shore up his support, with speculation rife new elections will be called in the coming months.
- German chancellor Merkel won backing from the country’s parliament for the bailout package to Greece, despite her own embarrassing revolt by her conservative supporters. Merkel indicated that extending debt maturities and reducing interest rates on Greek debt could be back on the table if the Greeks stick to the agreement. But she made clear there will be no debt write-down.
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