21 Mar 2014
•Markets were volatile during the week as the US central bank governor stumbled when asked when interest rates would start to rise and then indicated that they may rise at a quicker pace.
•The Aussie market looks likely to finish flat, whilst US stocks rallied this week bringing the market to within a fraction of another record high.
•European stocks also rallied as Russian President Putin made clear that the rest of Ukraine didn’t interest him and he was happy with just Crimea. Russian troops took Crimea without any conflict following the vote.
•Asian markets were down as poorer Chinese economic data and concerns regarding two recent corporate defaults waned on the region.
•Merger potentials David Jones and Myer reported this week. Results were uninspiring, though not any worse, as retail conditions struggle to improve.
•Transurban Group announced that it, and its partners (Lend Lease), have been selected as the preferred tenderer for the contract to design and construct the NorthConnex Motorway (formerly F3-M2).
•AGL Energy is pressuring the NSW government to allow coal seam gas developments by warning of the effects of potential gas shortages. AGL released a study that concluded NSW could experience about 20 days of gas shortages from the winter of 2016 if the winter is particularly cold.
•Locally, business finance lifted in January with total commitments up by 2.1%. A small increase given the current low levels, but a positive sign nonetheless. Personal lending and personal finance continued their anaemic trajectory.
•Sales of new motor vehicles in Australia lifted slightly in February. However, total sales are now 3.5% lower than in the same period last year.
•Job ads on the internet fell by 3.3% in February, to be worse than this time last year. 7 of the 8 occupational groups fell in February. The weakest demand was for sales workers, which fell 5.7%.
•The cold weather that plagued the US for much of December and January seems to have fallen out of the economic data with industrial production and overall output beating expectations on the upside.
•Subsequently, the US central bank agreed to again cut their monthly stimulus measures by another $10bn. This was expected. Unexpectedly, they also mentioned that they may need to push interest rates up a bit more aggressively in 2015 and 2016 than previously expected.
•Eurozone annual inflation dropped back in February to same level that triggered a surprise cut in interest rates in November. The reading was the joint lowest in 4 years. Very concerning to the European recovery.
•The Senate rejected the Abbott Government’s legislation to abolish the carbon tax. Labor and the Greens used their combined numbers to quash the legislation. Finance Minister and Assistance Treasurer Arthur Sinodinos was forced to stand aside from his frontbench post while a corruption enquiry investigates the dealings of a company he was involved in prior to entering parliament.
•The people of the Crimean region of Ukraine voted in favour to annexe to Russia. Hardly surprising given Russia already controlled the area and most of the area is Russian speaking. The vote and result has been declared illegal by the western world. Financial and travel sanctions have followed for government officials and large business owners in Russia and Crimea. Further sanctions are likely.
• Chinese Premier Li Keqiang announced that corporate bond defaults are likely to increase in China and have to be tolerated. We’ve seen evidence of 2 company defaults already over the last couple of weeks. This is a big change in stance from previous policy where corporates were bailed out by the Chinese government in order to maintain stability. Given very high debt levels in China, this is a game-changer.