25 Sep 2015
- Markets fell across the board on concerns regarding the strength of the global economy given the US central bank’s decision not to raise rates.
- European markets were hit by negative sentiment after the Volkswagen emissions scandal hit the German market hard. The company admitted to installing a device in their diesel cars which ensured they passed emission tests. Automakers around the world sold off.
- In local stock news, Sydney Airport reported strong passenger numbers in August. Key was incoming international passenger growth, no doubt helped by the low Australian dollar. In addition, ACCC has approved the alliance between Qantas and China Eastern, which will see an increase in flight frequencies and destinations between Australia and China.
- Suncorp has indicated that their technology upgrade is expected to deliver $170m in annual cost savings by 2018. CEO Patrick Snowball will stand aside next week, after more than six years in the role, for current non-executive director and ex GPT CEO Michael Cameron.
- Santos announced that its Gorgon LNG project has started producing its first liquefied natural gas on Curtis Island (QDL) on schedule and within budget. The first cargo of LNG will be shipped to Asian markets in the coming weeks.
- The Australian dollar fell this week from 72c to 70c against the US dollar on concerns regarding Chinese growth. Our dollar also fell against the euro and the yen.
- Australian residential property prices in our eight capital cities rose by 4.7% over the three months to the end of June, taking the surge in home prices in the 12 month period to 9.8%. The average residential dwelling is now $26,000 more than in the June quarter.
- The US central bank’s decision to hold off raising rates has unsettled markets. The Fed’s bearish rhetoric has some thinking that they won’t raise rates now until 2016, which may increase the risk of them having to move quickly thereafter. We think the Fed made a mistake in not raising.
- The Fed’s actions and comments also stoked concerns over the strength of the global economy, given the US economy is growing strongly enough to weather a rate rise.
- Existing US home sales fell more than expected in August from July levels. Strong price rises more recently might be the culprit.
- Key Eurozone data, which measures the strength of the Eurozone economy, fell slightly in September from August levels. However, the data continued to show an expansion in activity in the Eurozone.
- Chinese growth concerns were in the headlines again. This time a key manufacturing reading dropped to a 6.5 year low.
- Treasury head John Fraser said Australians have become complacent about their declining wealth, with the problems facing the nation similar to the early 1980s when the Australian economy was in decline, but the community didn’t recognise the need for policy changes.
- The Greek election result was confirmed with Syriza the clear winner, but will rely on the Greek Independents to secure a majority and form government. Alexis Tsipras retakes the prime ministership. A welcome result across Europe.
- The South Australian Premier has stated that the GST has fallen well short of expectations as a result of changes in consumption and saving patterns. Yes, it’s fallen short, but for other reasons – it doesn’t apply to all goods and services, the rate hasn’t been increased since its introduction in 2000, and we’ve been through a global financial crisis (i.e. less spending).
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