17 Jul 2015
- Markets pushed higher this week off the back of Greece finally reaching a deal with its creditors. The European Central Bank has expanded aid to Greek banks, which should see them re-open on Monday.
- However, some markets remain mixed as the creditors negotiated harder than expected forcing Greece to legislate reforms before receiving their third bail-out package.
- The US equity market pushed higher, helped by M&A deals and some positive earnings results from key financial stocks.
- Australian equities powered ahead this week as investors sought out some bargains following the markets poor run of late.
- European markets stabilised and pusher higher following the Greek debt deal.
- Asian stocks pushed higher, with the exception of China. Some trading halts were lifted on Chinese stocks, but many still remain halted.
- In local stock news, BHP Billiton will book a US$2bn impairment charge after reviewing its US onshore gas assets, the result of falling oil prices and reductions to goodwill. Its US onshore business will still have net operating assets of around US$24bn.
- Woodside Petroleum’s quarterly revenue has plummeted nearly 50% on the same time last year, after a 35% slide in benchmark gas pricing, in addition to production declines. This may result in sharp cuts to the company’s dividend going forward.
- The Australian dollar continued to fall as it became more certain the US central bank will raise rates this year (putting further upward pressure on the US dollar) following the Chairwoman’s testimony to congress.
- Oil prices fell as a nuclear deal was reached between Iran and major western nations. The deal will result in trade and economic sanctions being lifted, thus allowing Iran to restart oil and gas exporting. US congress still needs to pass the deal.
- Australian business confidence has hit a second year high, whilst business conditions are the best in a nearly year. However, firms remained reluctant to invest, requiring greater certainty and higher rates of return.
- Australian consumer sentiment has been hit leading to seven month low in optimism. No doubt the Greek debt crisis and sharp falls in the Chinese equity market haven’t helped. Though issues closer to home (deteriorating wages growth, slowing economy) are also to blame.
- US retail sales fell in June, against forecasts for a gain. The fall was broad based with declines seen across most categories. Sales were up 1.4% over the year. Quality of data may be in question given consumers have changed the way they spend (i.e. online).
- Greece finally reached a deal with its creditors after negotiations stalled over the weekend. The creditors have forced Greece to legislate reforms (tax, pension system, civil justice system, industrial relations and labour market, public service) through their parliament before they can receive the 86bn euro ($127.9bn) bail-out and restore the liquidity program to Greek banks. No debt relief was included in the deal. The IMF has since indicated they may not assist unless debt relief is immediately back on the table. The Greek parliament passed the first round of reforms, with opposition parties voting for whilst the ruling Syriza party and coalition members voted against.
- In local news, Treasurer Joe Hockey has dismissed the RBA’s call for a review of negative gearing, as the RBA argued that the policy could encourage debt fuelled property speculation. It already is. The Federal Labor party is in trouble after Bill Shorten’s less than impressive performance at the trade union royal commission and the leak of a confidential climate proposal which appeared to resurrect a carbon tax.
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