30 Oct 2015
- Markets were buoyed by the US central bank’s positive rhetoric regarding the strength of the US economy, putting a December rate rise back on the table.
- It’s been reported that 68% of US companies have beaten analysts’ expectations, which is slightly above the historical average. However, analysts had lowered their expectations leading into reporting season.
- In local stock news, National Australia Bank has reported a 20% rise in net profit, which was below unusually high market estimates. Revenue and lending growth were reasonable, with asset quality improving, but the key net interest margin fell. The company also announced the sale of 80% of their life insurance business to Nippon Life and progress on the demerger of its UK business.
- Woolworths warned that its first half profit could fall significantly on lack-lustre food and liquor sales. Their NZ supermarkets result was strong whilst Big W is disappointing. The company is ramping up investments into its supermarket division amid stiff competition and flat-lining sales.
- ANZ posted a 1 % increase to net profit to $7.22bn, coming in below market expectations.
- Stockland says it’s on track to meet its forecast for strong earnings growth this financial year after a solid first quarter. They received 1,557 net deposits in the first quarter, and are on track to achieve their target of 6,000 residential settlements this financial year. The company is also looking to increase their dividend.
- The Australian dollar fell this week on the back of lower inflation numbers, which might lead to the RBA cutting rates sooner than many expected. The change in the US central bank’s rhetoric also put upward pressure on the US dollar.
- Australia’s inflation rate has missed expectations in the September quarter, coming in at the lower end of the RBA’s 2-3% target band. The fall increased speculation that the RBA may cut rates at next week’s meeting.
- Key global manufacturing data came in better than expected, which shows global economic conditions are improving. The US recorded its highest reading since May.
- US economic growth came in at a 1.5% annual rate in the third quarter of this year. The reading was in line with expectations, but marks a slowdown in the rate of growth from the previous quarter and the same time last year.
- China’s central bank cut interest rates again in moves aimed at supporting the economy as they attempt to maintain their 7% economic growth target. Lending and savings rates were lowered, and the banking systems reserves requirement was reduced to maintain liquidity and encourage loan growth.
- China’s central bank also removed the deposit rate ceiling, which was seen as a key step towards satisfying the requirements set by the International Monetary Fund for the Chinese currency to be considered a reserve currency.
- Doubling the length of time an asset has to be held before it is eligible for a capital gains tax discount is being floated as a fix to keep asset prices in check. Alternatives included reducing the discount from 50% to 33%, which would also generate more than $2bn for the budget.
- China has finally abandoned its one-child policy, but will only allow couples to have two children. The one-child policy was mandated in 1979 to slow population growth. The recent move, whilst welcomed, won’t do much to arrest China’s very poor demographics.
- China saw gains in their defence sector after the US carried through with a threat to sail a warship close the hotly disputed artificial islands that China has claimed in the South China Sea.
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