21 Feb 2014
• The weak labour market is producing the weakest growth in wages for more than decade. The annual growth rate of 2.6% in 2013 was the slowest since 1997. More importantly it was slower than inflation (2.7%).
• Sales of new motor vehicles in Australian retreated in January, with total new sales 3% lower than in the corresponding period last year. Muted wages growth and rising unemployment is not helping.
• The Reserve Bank of Australia released the minutes from their interest rate meeting in early February, emphasising that they were in favour of maintaining a period of stability in interest rates.
• US economic data continues to be softer with retail sales falling in January after a fall in December. US jobless claims also rose and business inventories appear to be too high. The extremely cold weather could be the protagonist, but we won’t know for another couple of months.
• Against the softer data, US consumer sentiment was steady in February and ahead of expectations, whilst consumer confidence and inflation expectations were also up.
• Economic growth data for the Eurozone confirmed the region is gradually recovering, with almost all member states now out of recession. Still lots of work to be done, but a big positive nevertheless.
• It emerged that the Japanese economy put in its best performance in 3 years during 2013. However, the annual figure was only modestly ahead of 2012, which may force the Bank of Japan to act even further than their recent unprecedented actions. All about demographics and reforms to the economy.
• The Aussie share market rose strongly this week with company reporting season well underway.
• Results so far have been largely as expected with no major expectation misses supporting stock prices for the week.
• European stocks rose after economic growth data for the Eurozone confirmed the region is gradually recovering. Asian and emerging markets were mixed.
• In local stock news, BHP, Rio Tinto, Asciano, Seek, and AMP beat expectations, with results in-line from Newcrest, Bendigo & Adelaide Bank, NAB, IAG, Woodside, and Wesfarmers. Companies who missed included Ansell, UGL, Coca-Cola Amatil, and Amcor.
• Myer has again approached rivals David Jones for a tie-up between the companies.
• In US stock news, Facebook has agreed to purchase WhatsApp (online platform for sending images, video, audio, and text messages for free) for USD$19bn in stock and cash. WhatsApp has more than 450 million users, with 50 billion messages handled daily, and is rumoured to be adding 1 million users per day.
• The gold price has been somewhat supported of late breaking through the $1,300 USD per ounce barrier. Support has come from concerns regarding US central bank action and also from Asian and emerging market buyers who have been hit with falling local equity and bond markets.
• Qantas is in the political headlines again with the Federal Government leaning towards a debt guarantee (rather than handouts) to provide short-term relief and pushing parliament to repeal parts of the Qantas Sale Act which heavily constrain Qantas’ ability to compete with local and global rivals. Both measures are a positive for Qantas, its shareholders, and the travelling public.
• The Italian PM Enrico Letta resigned amid mounting pressure. This follows the extensive period of time it took the Italians to form government and elect a leader. His replacement – 39 old Mayor of Florence Matteo Renzi, the youngest Italian leader ever (even younger than Mussolini by 3 months). The Italian people and markets have taken the appointment well, but it means further instability.