28 Feb 2014
• In a further concern for the unemployment rate, Qantas has announced plans to cut 5000 jobs (15% of its workforce) over the next 3 years in order to remain viable and improve its credit rating (which affects borrowing costs).
• Australian construction work fell in the 4th quarter of 2013. Private construction was weaker again slowing to the worst reading since 1st quarter of 2010. Public construction bounced higher after dropping to its lowest levels since mid-2009. Residential alterations and additions were strong, but off a very low base.
• US existing home sales fell 5.1% in January, much larger than expected. This continues the recent run of stagnating US housing sector data. A combination of higher mortgage rates, extreme weather, and low levels of inventory look to be the cause.
• The minutes of the Bank of Japan’s most recent policy meeting revealed that several of the bank’s board agreed that aggressive monetary policy (low interest rates and money printing) need not end in 2 years from April 2013, the original time frame set.
• Data in Germany showed the business climate had improved the most in over 2.5 years. German consumer confidence also rose to a 7 year high.
• Australian company reporting season is around two-thirds complete. Overall, results have been in line with expectations, with larger share price movements being the result of stock specific issues.
• The big miners, housing related stocks, discretionary retail, and stocks linked to the share market have performed well. Banks have been solid, with a mixed bag from mining services.
• Company reporting results this week included wins for Ramsay Health Care, Flight Centre, Sydney Airport, with Crown, IAG, NAB, Caltex, Lend Lease in line with expectations. Missing expectations were Santos, AGL Energy, and IOOF. QBE was a miss, but overall result looked positive going forward.
• Shell sold its Australian downstream assets (refining, fuels, chemicals, brand licencing and distribution in Australia) to Swiss based Vitol, a Dutch owned multi-national energy trading company.
• European markets were gripped by the social unrest and political events in Ukraine. A power play is now ensuing between Russia and the US/European Union. Assistance is needed on all sides if Ukraine is to rebuild.
• European stocks did hit a 6 year high earlier in the week, taking the lead from the US, where the equity market continues to rise.
• The iron ore price has been falling hitting a low of $120 per tonne, which is its lowest level since July 2013.
• China’s currency had its biggest fall in more than a year. This was against a steadily rising currency over the past few years. The fall was speculated to be the actions of the Bank of China trying to restore some volatility in the currency to ensure hot money doesn’t continue to find its way into China.
• It now appears likely that PM Tony Abbott will go to the next election promising spending cuts to health and education as part of the government’s long term strategy to balance the budget. Key is a reduction in the rate of spending growth in the longer term so that the deficit and borrowings don’t balloon further.
• Political developments in Ukraine and Italy continued. Ukraine issued an arrest warrant for its deposed President and appealed for $35 billion in aid from Western countries. The new Italian PM won his first confidence vote in parliament pledging to cut labour taxes, free up funds for investment in schools, and pass vast reforms to spur the sagging economy.
• Australia hosted the G20 summit this week which appears to have gone down very well both locally and globally. Finance ministers and central bank chiefs from the nations represented (covering 85% of the world’s economy) have vowed to implement policies to boost the world economy by more than $2 trillion over the coming 5 years. These meetings usually end with no agreement or clear outcome, so we’ve done very well in our hosting duties.