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Markets hold their own in light of plenty of news flow

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Local and global equity markets looked set to finish the week higher in what has been a topsy-turvy week for investor sentiment. 

In local stock news, Commonwealth Bank’s $6 billion share buy-back was more than $18 billion oversubscribed with an average scale back of almost 80%. Those holding a smaller number of shares were scaled back less whilst those left with less than 20 shares will see them compulsorily acquired.

Boral has completed the sale of its North American building products business for almost $3 billion to an American company. Boral has also completed the sale of its timber business for $64.5 million. Proceeds will be used to reduce debt.

Oil prices jumped to 7-year highs after OPEC+ agreed to stick to gradual production hikes, ignoring calls to increase production at a faster pace to bring down the oil price. The rapid ascent in the oil price has been due to a toxic combination of simultaneous re-opening across the globe (demand) along with significant under-investment in fossil fuels over the last few years (supply) given the focus on renewables. Russian President Putin said he was ready to stabilise energy prices by increasing gas shipments to Europe.
The Reserve Bank of Australia maintained the cash rate at the record low of 0.1% for the 10th consecutive month. It also confirmed its government bond yield targeting and its continued purchase of government securities at a rate of $4 billion per week at least until mid-February 2022. The central bank Governor reiterated that they expect the economy to be at pre-Delta variant levels by the 2nd half of 2022.

The Australian banking regulator APRA has raised the minimum interest rate buffer that lenders need to account for when assessing home loan applications in an attempt to slow booming home prices. The interest buffer has been increased to 3% from 2.5%. Time will tell if they need to do more to achieve their objective in what is a delicate balancing act.

Australian private sector credit grew by 0.6% in August, up 4.7% over the year, with housing and business credit rising, whilst personal credit contracted. Owner-occupied housing credit is now up 8.4% for the year whilst personal credit is down 5.6%.

Australian dwelling approvals unexpectedly rose by 6.8% in August, against expectations of a 5% decline, with both apartment and detached housing approvals increasing. Approvals for apartments drove the monthly gain. WA, SA, and VIC saw the strongest overall gains.

Job vacancies fell by 9.8% in the 3 months to end of August but remain 46% above their pre-pandemic levels. Private sector vacancies fell by 10.9% whilst public sector vacancies were up 2.3%. NSW, SA, and TAS saw the largest falls.

Australian dwelling prices rose by 1.5% across the 8 capital cities, with annual growth now sitting at 19.5%. Hobart, Canberra, and Sydney led the charge in September.

The value of new lending for housing, excluding refinancing, fell 4.3% in August, a larger fall than expected. Lending to both first home buyers and owner occupiers fell whilst lending to investors rose. Lending to first home buyers saw the biggest fall and is now down more than 21% since the peak in January 2021. Affordability hitting home.

Australia’s trade surplus came in at a record $15.1 billion in August, with exports up 4.1% whilst imports fell 1.5%, against expectations of a $10 billion rise. Non-rural exports were up a very strong 11.3% in the month to now be up more than 70% over the year. Recent iron ore price falls should see the trade surplus retreat somewhat in the period ahead but still a massive number for August.

Asia’s manufacturing activity rebounded in September after virus fears and restrictions eased. But European manufacturers reported increasing strains from supply chain squeezes. That, plus energy shortages, not helping.
China’s central government officials ordered the country’s top state-owned energy companies, with all forms of fuel on the table, to secure supplies for this winter at any cost as energy shortages threaten life and their economy.

Domenic Perrottet has been confirmed as NSW’s youngest ever premier, largely as expected, winning an internal party room vote very easily. He was most recently the Treasurer and has made some subtle changes to his front bench. Perrottet has also announced a faster easing of virus restrictions than his predecessor’s plan. Nationals’ leader and Deputy Premier John Barilaro also announced he is retiring from politics.

US politics remained messy enough to impact market sentiment as congress continues to debate their self-imposed debt ceiling of which any breach will see the government unable to pay their bills. Democrats are considering a smaller stimulus package to improve chances of it being passed, whilst the Biden administration is also set to unveil its China trade policy following a review of import tariffs. Interestingly, a recent report indicated that China is not complying with phase 1 of their trade deal with the US.

The Chinese government sent a record number of fighter jets into Taiwan’s defence zone over its national day weekend, with the numbers rising again early this week before Taiwan scrambled fighter jets and deployed missile systems to monitor Chinese planes. The show of force over 4 consecutive days is part of a growing and troubling long-term trend.  

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Markets buoyed by US stimulus bills

Need help? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Local and global equity markets rose strongly this week buoyed by strong company earnings results, the passage of the US infrastructure bill, and progress on the bigger budgetary bill. 

Analysts now expect 2nd quarter profit growth of 93% for the 500 largest US companies. With their quarterly reporting season almost complete, 87% of companies have beat analyst expectations, which is the highest beat on record. 

In local stock news, general insurer Suncorp improved full-year cash earnings by 42% with shareholders to receive a special dividend, whilst the company will also undertake an on-market stock buyback. 

Toll road operator Transurban revealed that the costs of the West Gate tunnel project in Melbourne have blown out by about $3.3 billion. The company reported statutory profit of $3.27 billion. Lockdowns in Sydney, Brisbane, and Melbourne have reduced the number of cars on the road and have weighed on revenue. 

Commonwealth Bank of Australia released its 2021 financial year results reporting a $1.4 billion increase in cash profit to $8.7 billion over the last 12 months, an almost 20% increase. The bank also announced a $6 billion off-market stock buy-back. 

The gold price had fallen sharply over the last week and half before mounting somewhat of a recovery in the last few days. A stronger US dollar along with the continuing economic recovery and expectations of the US central bank paring back its stimulus program have all put downward pressure on the gold price of late. 

The iron price has continued to fall from its lofty heights following a report which said that China wants to limit steel makers’ impact on its environment, which made investors reassess their expectations for iron ore demand. 
The Reserve Bank of Australia has revised its economic growth forecast down to 4% for 2021 but has kept their forecast for unemployment at 5% for the same period. They did revise their unemployment forecast for 2022 down to 4.25% and left their inflation forecasts unchanged at 1.75% for 2022 and 2.25% for 2023. 

The negative impact of lockdowns have begun to rear their ugly head, putting aside the societal issues, as more than 15,000 home and business owners were unable to repay their loans in July. In addition, an additional 150,000 Australians became unemployed last month according to Roy Morgan. Their latest data showed the bulk of the job losses came from part-time work whilst 61,000 full-time workers also became unemployed. 619,000 workers are now looking for full-time work whilst 803,000 are looking for part-time work. 

July saw the National Australia Bank business confidence index and business conditions fall sharply, which isn’t surprising given the size and extent of lockdowns in a number of states. Australian consumer sentiment fell by more than 4% in August as consumers’ fears of unemployment rose sharply. 

US consumer prices for July rose at its slowest pace in the past 5 months as some price increases have subsided on the back of softening demand and increased supply. Even so, the July inflation number of 0.5% is still quite high, with the annual rate at 5.4%, as demand pressures and supply issues remain. 

US nonfarm payrolls increased by 943,000 jobs last month a Labor Department report showed. Economists had forecast payrolls would increase by 870,000. The report also showed strong wage gains as employers competed for scarce workers as many workers remain at home collecting overly generous unemployment benefits. The unemployment rate also dropped to a 16 month low. 

The US central bank had contrasting rhetoric from a couple of members this week with one suggesting that the US should be well past the pandemic crisis before the central bank raises rates. Another member said high inflation this year may have already met one of the bank’s benchmarks for raising rates. 

The Germans have again warned that inflation in the Euro area could pick up faster than expected and urged the European central bank not to drag out their emergency bond-buying program.   

A gauge of investor expectations for the German economy plunged to 40 from 63 points in July as fears about the impact of the delta variant gather pace. 

Chinese economic data showed exports rising by 19% in July on the same time last year, coming in just under expectations, whilst imports were up 28% on the same time last year, also coming in below expectations. 

China’s central bank has fanned expectations of further monetary policy easing, saying in its latest quarterly report that inflation pressures are controllable whilst highlighting risks to the economic growth outlook. 
The US Senate voted to progress the US$1 trillion infrastructure bill with 19 Republicans voting with Democrats to support the push. However, the Democrat leader of the House has said she will only bring the bill to a vote after the Senate passes a separate US$3.5 trillion bill which has all kinds of things in it, most of it Democrat election promises, which the Democrats will likely look to push through via a process called reconciliation (ie. without Republican support). The debt ceiling (currently at US$28.5 trillion….) with partisanship likely to make it a tough task. 

The Biden administration faced some hard truths this week as it pertains to foreign policy. A return to the Iran nuclear deal looks to be dead in the water as Iran races towards the capacity to build a nuclear bomb in light of perceived US weakness. The US will now be sending troops back into Afghanistan following an ill-advised move earlier in the year to remove US troops from the country. The country has again become a hotbed for terrorism with the Taliban carry out deadly attacks against US allies left behind. Lastly, US energy self-sufficiency is very much a thing of the past after US oil inventories got so low that President Biden had to ask OPEC+ to increase supply. US inventories are low due to increase in demand, but mainly due to government policy banning new investment in oil & gas and pipelines.  

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Company reporting season buoys investor sentiment

Need help? Contact Macarthur Wealth Management for expert financial planning in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au.

Local and global equity markets largely trended higher over the week, buoyed by strong company earnings results and slightly more dovish central bank sentiment. 

Results for US corporate quarterly reporting season have been much stronger than expected at the half-way mark, with 92% managing to meet or beat earnings estimates while 86% have done so on the revenue side, making it the highest beat ratios since 1st quarter 2008. 

In local stock news, National Australia Bank announced it will buy-back $2.5 billion in shares. The buy-back will happen in August and follows ANZ declaring a similar move earlier this month. Banks are awash with capital following wealth management sales and provisioning for bad debts which never eventuated as the government and central bank saved everyone. 

Ryan Stocks has become the chairman of Boral after Seven Group gained almost 70% of the company through its takeover efforts. Seven has also installed its CFO as a director, whilst the previous Boral chair has retired and 2 other board members will retire after the AGM. 

US digital payments giant Square Inc has agreed to acquire Afterpay in a deal worth $39 billion, or $126.21 per share. The all-stock deal will see Afterpay integrated into the existing Square ecosystems worldwide. Afterpay’s board has unanimously recommended the deal to shareholders. Afterpay shareholders are expected to own 18.5% of Square once the deal is enacted. 

Oil Search’s board has endorsed Santos’ offer of $4.52 a share, which will make the combined company one of the 20 largest oil and gas providers in the world. 

The oil price trended lower this week as concerns arose regarding the pace of the global economic recovery in light of increasing virus restrictions in some countries.
The Reserve Bank of Australia has unsurprisingly kept the cash rate at 0.1% at their August meeting. Given current lockdowns across the eastern states, any rhetoric about the bank moving earlier than expected to remove stimulus has now gone. 

Concerns continue to mount regarding the economic recovery given the continued length of the Sydney lockdown (including army deployment), with Melbourne and parts of Brisbane also now under lockdown. 3rd quarter economic growth will be negative and 4th quarter isn’t looking too good at this stage, which might see the economy dip back into recession. 

Australian credit rose by a solid 0.9% in June, boosted by a 1.6% business credit, likely the result of businesses drawing down credit facilities to survive the lockdowns. Housing credit also posted a strong lift for the month with both owner occupier and investor credit rising. Personal credit fell, hardly surprising given concerns regarding the length of lockdown. 

Australian dwelling prices rose by a solid 1.6% across the 8 capital cities in July, with annual growth sitting at 15%. Price rises in July were particularly strong in Sydney, Brisbane, and Canberra. Regional prices increased by 1.7% in the month. The monthly rate of growth peaked in March this year at 2.8%, and has since trended lower, but the pace of growth remains strong. 

Residential building approvals in Australia fell by 6.7% in June, driven by a large drop in approvals for houses as growth settles at lower rate post the HomeBuilder scheme finishing. New lending for housing fell by 1.6% in June, with lending to first home buyers driving the fall whilst lending to investors rose. 

Plenty of rhetoric from US central bank members this week pointing to internal differences of opinion but not so far apart as to cause any major issues for chair Jerome Powell on the communication front. A couple of prominent members waxing lyrical about the economy being strong enough to see a reduction in money printing from 2022 and potential rate rises in 2023. 

US private payrolls data increased by a significantly less than expected 330,000 in July, versus expectations for more than 690,000

Price increases are starting to hit home in Europe with Germany’s inflation rate jumping to the highest level since 2008. Likely temporary given both the demand (government stimulus, restricted travel) and supply shocks (restricted work practices, border restrictions on labour, commodity price increases), but the data will fuel debate about whether policy makers need to start removing stimulus faster than anticipated. Highly unlikely at this stage, but worth monitoring. 

The Chinese government has pledged more effective fiscal support for their economy and tighter supervision of overseas share listings as policy makers highlighted economic risks in the 2nd half of this year. The US securities regulator has also increased disclosure requirements for IPOs of Chinese companies. 
US President Biden and his administration will likely ramp up already very high levels of government stimulus as the US economic recovery begins to stall, with $10 trillion of new spending/investment planned. 10 million Americans remained unemployed with new obstacles emerging as some states reconsider mask mandates and other restrictions, all whilst many of the emergency stimulus programs from 2020 come to an end. The political cycle is clearly front and centre as the Biden administration looks to buy its way to a stronger rebound in light of the all-important US mid-terms next year. 

A Hong Kong court sentenced the first person convicted under a national security law imposed by Beijing, to 9 years in prison. Doesn’t bode well for dozens of pro-democracy activists awaiting similar trials.  

China’s government has quietly issued new procurement guidelines in May that require up to 100% of local content on hundreds of items, erecting fresh barriers for foreign suppliers, according to a number of sources. The government has not responded to queries on the document. The edict flies in the face of their admission to the WTO and their phase 1 trade deal with the USA. Hardly surprising. 

YouTube suspended Sky News Australia from uploading content onto its website for a week under its “strikes” system. The Alphabet (Google) owned company said that the media company had breached its Covid-19 misinformation standards. Sky News Australia vehemently denies the allegations. In any case, a stain on censorship in Australia’s history. 

A growth number of Australian government MPs are pushing back against the use of vaccine certificates for domestic travel and attendance at venues and events. It came after news the government had agreed on a passport system for international travel, but was facing internal unrest when it comes to domestic use.  

Need help? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Share markets retrace falls on virus concerns to finish higher

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Local and global equity markets had a topsy-turvy week initially falling sharply on virus concerns before retracing those losses to finish the week higher as bad news became good news for markets on the expectation of more government and central bank support.  

In local stock news, Rio Tinto reported lower than expected iron ore production and shipments for its 2nd quarter. Heavy rain in WA’s Pilbara region, and coronavirus measures, limited efforts. BHP also reported a dip in quarterly iron ore production. 

News broke that oil and gas player Santos is pursuing an unsolicited takeover bid for rival player Oil Search. 

JB Hi-Fi shares rose strongly, no doubt supported by lockdown, after the company reported preliminary full year results showing sales up 12.6% and a soaring net profit. 

Lendlease continued to streamline their business selling its service business to Service Stream for $310 million. The property group has recently sold its engineering business and US telecommunications and energy operations. 

OPEC and its allies struck a deal to inject more oil into the recovering global economy, overcoming an internal split, which resulted in a strong fall in the oil price. The oil price recovered some of the fall after data showed lower than expected US inventories. 

The Aussie dollar fell further earlier in the week on increasing virus concerns before mounting a small recovery before the week was out. 
The evolving restrictions in NSW and VIC will lead to sizable contraction in economic growth in the 3rd quarter considering both states combined account for more than 50% of Australia’s economic output. Whilst the government’s fiscal taps have been turned back on, plenty more handouts will be required. 

Commonwealth Bank lending data shows a slowdown in the pace of growth in new home lending. However, lending to investors continues to accelerate as lending to first home buyers slows. The average loan size remained elevated whilst the share of fixed rate lending is relatively high. 

The preliminary estimate showed Australian retail trade fell by 1.8% in June coming in well below estimates, with the fall heavily affected by lockdowns in several states. Retail spending in July will be substantially weaker. 

The Australian national goods trade surplus hit a new peak due to demand for iron ore, with increase in exports for metals, coal, non-monetary gold and gas pushing the surplus to $13.3 billion for June. 

Data from the US Commerce Department showed retail sales rebounded 0.6% last month as spending shifted back to services as states are reopening at a faster pace. 

The European central bank left interest rates and its program of asset purchases unchanged, as expected, while tweaking its forward guidance on policy to move it in line with its newly adopted inflation target where they’d like to see inflation consistently at 2% before moving on interest rates. 

Banks in China kept the benchmark loan rate steady indicating that the central bank is continuing to keep policy stable despite the recent move to add liquidity to the financial system.
On the virus/vaccine front, increased and longer restrictions look likely for NSW and other parts of Australia as case numbers rise and the vaccine drive continues, whilst ICU admissions and deaths remain low. Case numbers in the UK, USA, France and Israel continue to rise, particularly troubling authorities in the UK and Israel where the number of deaths are also rising with already high vaccination rates. In contrast, cases in the USA are rising without the same corresponding increase in deaths. There was an uptick in civil unrest across a range of countries and cities, protesting against lockdowns and vaccine passports. 

China has pushed back against a World Health Organisation call for another probe into the coronavirus’s origins that includes examining whether it leaked from a lab, saying there’s no evidence for the theory……hardly surprising. 

The Trump administration’s US-China trade deal looks to be under review by the Biden administration after the US Treasury Secretary said the deal failed to address the fundamental problems they have with China. 

Taiwan will set up its first office in Europe using the name “Taiwan” (who would’ve thought), a decision the US hailed as a way for the island democracy to strengthen its global presence in the face of pressure from China. Lithuania offered to host the office putting themselves in the firing line of the Chinese given their “One China” principle. 

Days after the European Union announced ambitious plans to tackle climate change, the French broke ranks lobbying to water them down as President Macron can’t afford to rile voters ahead of the French elections next year. He’s already under tremendous pressure following recent poor showing in regional elections and recent imposition of the very unpopular vaccine passport.  

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Markets still fretting over rising virus cases

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Equity markets were mixed this week with developed markets flat to slightly lower on virus concerns whilst emerging markets moved higher assisted by Chinese policy support. 

A big jump in quarterly earnings is expected to mark a peak for US profit growth in the recovery from last year’s earnings collapse. Upcoming quarterly results will be key, with analysts now expecting 66% of companies to beat guidance. 

In local stock news, Sydney Airport’s board has rejected the $8.25 per share bid from a consortium of super funds citing that the offer undervalues the business, whilst Spark Infrastructure declined an offer for all its securities from a consortium of pension funds offering $2.80 per security. Pension funds cashed up, with cash burning a hole in their pockets. 

Wesfarmers made a $687 million bid for Australian Pharmaceutical Industries, the distributor of medicines and healthcare products and the owner of Priceline pharmacies, which will form the basis of a new healthcare division. 

Shareholders of waste management provider Bingo Industries voted for a Macquarie takeover, whilst Seven Group continues buying shares in takeover target Boral heading towards the 50% mark.

Buy-now-pay-later stocks fell sharply during the week after a report indicated that Apple plans to allow users to repay Apply Pay purchases in instalments

Oil prices fell this week on concerns regarding rising virus cases globally, which also resulted in defensive assets like gold and government bonds performing well. 
HSBC’s chief economist for Australia and NZ said with NSW accounting for 32% of the nation’s total economic output, an extended lockdown was likely to take a significant economic toll on Australia’s recovery from the virus. NSW Treasury estimates that each week of lockdown takes $850 million off activity. 

Australian employment rose by 29,100 in June following a 115,200 increase in May, with the unemployment rate moving down to 4.9%, its lowest level in a decade. However, recent lockdown measures will hurt those numbers in the period ahead. 

New Zealand’s central bank surprised most investors with a plan to scrap its bond buying program (money printing) from next week. The result will likely be a soaring NZ dollar. Not good for an export-led economy. 

US central bank chair Jerome Powell said it was still too soon to scale back the bank’s aggressive support for the US economy while acknowledging that inflation has risen faster than expected but portrayed a recent jump in inflation as temporary and focused on the need for continued job growth. 

Data indicated that US consumer prices rose by the most in 13 years last month, while core consumer prices surged 4.5% on the same time last year, the largest rise since November 1991. The bond market noticed briefly, before turning attention to rising virus cases. 

European central bank president Christine Lagarde has signalled that new guidance on monetary stimulus will be provided shortly and that fresh measures might be brought in next year to support the Euro-area economy after the current emergency bond program ends. 

China’s central bank cut the amount of cash most banks must hold in reserve in order to boost lending in the economy as growth starts to wane. 

China’s exports unexpectedly surged in June, helping to underpin the economy amid signs the recovery is starting to slow.  
In a sign that US-China relations won’t be fixed any time soon, the Biden administration will add more Chinese entities to its economic blacklist over alleged human rights abuses whilst the US Senate passed a bill that would ban all goods from China’s Xinjiang region unless importers can prove they weren’t made with forced labour. US relations with Iran don’t look any better with the likely realisation that the 2015 Iranian nuclear accord may be beyond saving, with no progress after multiple rounds of talks. 

On the virus front, the pace of reopening remains very mixed around the world whilst virus cases are rising in many countries. Most US states continue to reopen whilst California has just introduced some restrictions. The UK is proceeding with full reopening whilst cases continue to rise amongst a population with high vaccination rates. The rest of Europe remains mixed, particularly between the north and south, whilst cases continue to rise in South-East Asia. Closer to home, all states have seen varying degrees of increases to restrictions, with NSW’s lockdown extension and VIC entering a “snap” 5-day lockdown. 

In a sign that the people have had enough, we saw uprisings and street protests all around the world this week. Cubans have had enough of communism, South Africans weren’t happy with the jailing of former leader Zuma, whilst we saw protests in France, Greece, and here in Melbourne against government-imposed lockdowns and vaccine passports. 

Finance ministers from the US and Europe expressed confidence that a global tax deal endorsed by the Group of 20 has enough momentum to overcome domestic political obstacles in time for it to be finalised in October. 

Democrats on the US senate budget committee agreed to set a US$3.5 trillion spending level for a bill to carry most of President Biden’s economic agenda into law without Republican support. The bill would require the support of all 50 Democrats. This is in addition to the US$579 billion bipartisan infrastructure plan.  

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Equity markets fall on virus variant concerns

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Equity markets locally and globally fell this week on concerns regarding rising virus cases

In local stock news, Sydney Airport’s shares rose strongly after they received a $22.3 billion takeover offer equating to $8.25 per share from a consortium of infrastructure investors mostly made up of Australian industry super funds. The offer will be hard for the company’s board to rebuff, but markets aren’t so sure given the stock price remains well south of the offer price. 

Tabcorp will spin-off its lotteries and Keno arm as a separate ASX listed business but has chosen not to sell its wagering and media arm despite several suitors offering to pay about $3.5 billion. 

Seven Group has continued to lift their stake in Boral buying 60 million shares at $7.40 each with the company now owning almost 41% of Boral. 

The upward trend in oil prices reversed course this week on expectations that some countries may break ranks from OPEC+ production targets. The moves come after the United Arab Emirates blocked an OPEC+ deal that cartel leaders Russia and Saudi Arabia had hashed out to increase output. The Saudis and Emiratis have historically had each other’s backs. Demand is likely to remain high as the global recovery continues, whilst US supply runs low due to President Biden’s green policy. 

The Aussie dollar fell into the 74c range against the US dollar as investors sought out safe-haven currencies in light of rising Covid cases and weaker Chinese inflation data. 
The Reserve Bank of Australia held the cash rate at the record low of 0.1% as expected at their July meeting. The board also made 2 other policy announcements relating to their bond yield targeting program (ie. keeping government bond yields very low) and their bond buying program (ie. money printing) which will see them taper bond purchases from $5 to $4 billion per week until at least mid-November. They also changed their language slightly to indicate they don’t expect to lift rates until 2024 (previously “2024 at the earliest”). 

New lending for Australian housing rose by 4.9% in May with a particularly large lift in investor lending in the month which was up 13%. Owner-occupier lending rose by 1.9% whilst lending to first home buyers continues to flatten out. New lending was strongest in NSW and VIC. 

New personal lending rose by a very strong 11% in May, which continues the recent trend higher. Commonwealth Bank’s internal data shows lending for cars and household goods are trending higher whilst lending for holidays remains very soft.
 
The number of Australian residential building approvals posted a large 7.1% fall in May, likely impacted by the ending of the government’s Homebuilder grant scheme. VIC and TAS actually posted increases. Approvals for renovations remain elevated, whilst non-residential building approvals have lifted in recent months.

Australian retail trade rose by 0.4% in May, which was an upgrade on the preliminary estimate. Retail trade continues to run at an elevated level with all major categories running above pre-Covid levels. Spending on food and eating out drove the increase in May. 
 
The US Labor Department’s employment report showed non-farm payrolls increased by 850,000 jobs last month, but the total remains 6.8 million below its peak in February 2020, as the federal government’s over-generous and over-extended Covid unemployment program pays people to stay home until September causing massive labour shortages. The better than expected monthly number comes as some Republican states have started to remove/decline the federal unemployment programs ahead of time thus forcing people back to work. 

European central bank policy makers have revamped their inflation target for the 1st time in almost 2 decades giving itself more room to keep monetary policy loose. The move gives the bank room to overshoot the target if needed, which means they can ply even more stimulus for much longer. 
A deal on an international corporate tax system of sorts came a step closer as 130 countries and jurisdictions backed a plan that includes a minimum corporate rate and tax-sharing on multinational firms’ profits. However, 3 European Union countries have resisted the plan given they currently have corporate tax rates less than the minimum being proposed. 

On the virus and vaccine front, the NSW lockdown was extended by a week impacting children’s first week back at school. The low percentage of people vaccinated seems to be the main focus of those in charge given their ill-guided elimination strategy, in contrast to the more critical areas of ICU bed availability (plenty) and deaths (very low relative to a normal winter flu season). In other parts of the world, concerns continued regarding the Delta variant, which data shows is more contagious, is significantly less deadly than the original strain, and vaccines are more than effective. The US continues to reopen, the UK is nearing the date when all restrictions will be removed, whilst Japan declared another state of emergency as it tries to ready itself for the Olympics. 

Chinese authorities are planning rules changes which would allow them to block companies from listing overseas, closing a two decade loophole which has allowed Chinese tech giants to attract foreign capital. The move continues Beijing’s tightening of controls over the country’s largest tech companies. 

Former US President Trump announced that he will sue Twitter, Facebook, and Alphabet as well as their CEOs in a class action lawsuit for blocking him out of their social media platforms. Trump is banned from Twitter for life and Facebook for at least 2 years, pending another review. The case will likely be decided by the US Supreme Court with both sides effectively using the same argument that it’s their 1st amendment right to not be censored (in Trump’s case) and to censor (in the social media company’s case given they’re private companies).  

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

US Fed Chair reaffirms transitory inflation expectations

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Global equity markets moved higher this week whilst the Aussie equity market took a breather, no doubt impacted by increasing virus restrictions. 

In local stock news, the Commonwealth Bank sold its general insurance business to the Hollard Group whilst building products supplier Boral announced it will sell its North American business for $2.9 billion, which will give Boral more surplus capital. 

Woolworths shares fell following the market debut of its hotels and bottle shop business Endeavour Group. Shares in Endeavour began trading at $6.50 but closed lower on their 1st day of trading. 
Australian lending data remained strong in May with new lending for housing continuing to rise, whilst lending for household goods and cars continued to trend higher. The proportion of housing lending at fixed rates rose again in May with the 2-year term the most popular. Business lending fell in the month. 

The preliminary Australian retail sales for May from the ABS rose by just 0.1% coming in weaker than expected, while the strict lockdown in VIC saw retail spending fall by 1.5% in the month. Excluding VIC, retail trade lifted 0.7% in May. Overall, retail trade is 7.4% higher in May versus the same time last year. 

Other figures from the ABS showed that more than 25% of firms are having difficulty finding staff as closed foreign borders has stopped employers importing workers. The shortages are particularly severe in the resources / mining services and agricultural industries. 

Iron ore exports played a starring role in the nation’s record trade surplus of $13.3 billion in May with exports to China rising 20% to $12.7 billion, the 3rd consecutive monthly record. 

US central bank chair Jerome Powell tried to hose down some of the hawkish statements made by some of his peers last week in his address to US Congress. Powell outlined why the recent jump in US inflation to a 13-year high would be temporary with the surge created by a steep drop in prices last year (lockdown), higher petrol prices (surging demand and lack of investment), and rapid increases in consumer spending (too much stimulus). He remained confident inflation would fall to the bank’s long-term goal of 2%. 

US Treasury Secretary Janet Yellen, who was previously the central bank chair, has warned of a catastrophic hit to the economic recovery if the US can’t pay its bills on time, asking Congress to extend a July deadline to pay back some of the federal debt. Perplexing given her standing. On the one hand she’s advocating for more and more spending which they can’t afford, exerting significant pressure on her ex-colleagues at the central bank, whilst now advocating for debt ceiling extensions. 

Surveys of purchasing managers show the Euro area’s private sector economy is growing at its fastest pace in 15 years, whilst in Japan manufacturing activity expanded for the 5th month but services continued to shrink. 
Nationals MP Barnaby Joyce has reclaimed the positions of party leader and Deputy Prime Minister after a leadership spill, which saw him defeat Michael McCormack, 3 years after stepping down. The move is aimed at bringing the National party closer to its traditional roots and voter base, potentially at odds with its coalition partner, in order to arrest the party’s decline. 

Covid restrictions increased locally this week with NSW feeling the brunt, which again resulted in more state border closures, due to a “contagious strain” (pretty sure all virus strains are contagious) with 22 new cases reported over the last 48 hours (the equivalent to 0.000343% of NSW) and hospital ICU’s freer than free. The social contract of a “few weeks to flatten the curve” and stop hospital ICU’s from being overloaded has clearly taken on a new life of its own. The strategy has always been elimination, not suppression as they have led us to believe. Elimination isn’t possible. 

The EU has added the US to its so-called “white list” meaning Americans (vaccinated that is) can travel to the region without facing restrictions upon arrival, whilst European leaders are hoping that President Biden will reciprocate. Depending on your understanding of history, interesting to see how quickly we’ve moved to and accepted segregation (vaccinated vs the unvaccinated) and travelling with “papers” with our health records on them. An eye-opener.

As more information is released post the G7 summit, it appears the event wasn’t as friendly and productive as first reported, with member countries in plenty of disagreement when it came to climate policies and curbing any China threats. Hardly surprising given plenty of self-interest when it comes to these sorts of events and gatherings. 

A 6th round of negotiations in Vienna have failed to revive a nuclear deal (a terrible deal) that would lift US sanctions on Iran in exchange for its scaling back atomic activities. The move came a day after conservative cleric Ebrahim Raisi was declared the winner of Iran’s presidential election. 

China continued their crackdown against cryptocurrencies with the central bank saying that banks and payment firms must not provide payment services for crypto-related transactions. These moves come after the government stepped up action to rein in digital mining which is extremely energy intensive.  

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Investors undeterred by US inflation surge

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. www.macarthurwealth.com.au

Local and global equity markets were flat to slightly higher this week as investors looked through near-term inflation concerns. 

In local stock news, National Australia Bank, Crown Resorts, SkyCity, and Star Entertainment all found themselves in the ire of AUSTRAC as the regulator claims to have found serious problems in how these companies try to prevent financial crimes. 

Electronics design software vendor Altium jumped almost 40% after their board rejected a takeover offer from US software group Autodesk. The news helped lift Australian tech shares during the week. 

Woolworths’ takeover of food distributor PFD Food Services will go ahead despite the competitors’ concerns in the space. The competition regulator has allowed Woolworths to buy 65% of the shares in PFD, which delivers food to cafes, restaurants, hotels, clubs, and more, for $552m. 

Mortgage Choice shareholders have voted to accept a takeover bid from REA (realestate.com) at $1.95 per share, valuing the company at $244 million. Court and other approvals are still required. 
Australian new housing-related lending lifted by 3.7% in April to a new record high, with lending to owner-occupiers rising strongly to 4.3% while lending to investors was up 2.1%. Lending to first home buyers has now fallen for 3 consecutive months, likely due to affordability. Lending in NSW, VIC, and SA were the strongest in the month, whilst both WA and TAS posted falls. 

Australian business leaders reported great trading conditions in May, with the business conditions index reaching a new high for the 2nd consecutive month. 

The Australian government and the Australian banks received an upgrade from credit rating agency Standard & Poor’s with their outlook now considered to be stable. 

US consumer prices soared again with a 5% rise in May on the same time last year, pushing the inflation rate to a 13-year high. The May number came in well above expectations. The 3.8% rise in the core inflation rate, which excludes food and energy prices, was the sharpest increase in nearly 30 years. The US central bank remaining firm that price pressures will wane soon enough. 

The US economy added 559,000 jobs in May, coming in below expectations, but which helped push the unemployment rate down to 5.8%, whilst average wages surged for the 2nd consecutive month in light of severe labour shortages. Reports of employers paying job applicants just to attend the interview….the perverse result of government stimulus gone wrong – more than 12 million receiving unemployment assistance with almost 8 million job openings!

The European central bank confirmed its very accommodative monetary policy stance with interest rates unchanged at 0% given inflation remains well under target. The Bank also confirmed that their quantitative easing programs will continue at the current pace until at least the end of March 2022. 

The Chinese consumer price index rose 1.3% in May, which was less than expected. However, the Chinese revealed that their factory gate prices increased at the fastest pace since September 2008, which is a strong indicator of rising inflationary pressures. 
The Chinese Communist Party now believes it can wean itself off Australia’s resources by rapidly expanding its scrap steel recycling industry. They claim that by using the latest technology it can cut our iron ore exports to them in half in the next 10 years. Ambitious, but hardly surprising given the sky-high prices they’ve been paying for iron ore of late and at a time when Australia-China relations are almost non-existent. 

US President Biden has pitched to Republicans and the G7 the idea of a 15% minimum tax on corporations along with strengthened enforcement efforts. The proposal sets aside the Biden administration’s earlier plan to raise the US corporate tax rate to 28%, which they have no chance getting through the Senate. Doubtful the G7 ever physically puts in place a global corporate tax. A slippery slope once enacted. But we are likely to see some moves on the digital tax front (historically led by Australia), even though the Chancellor of the City of London is already calling for London’s exemption….

The US Treasury Secretary Janet Yellen (ex-US central bank chair) has urged other “rich” nations to keep up spending to support their economies even as pandemic wanes, insisting that US inflation would be elevated but transitory….likely, but not if you maintain emergency level spending indefinitely when there is no emergency! Yellen insisted that more spending was needed to fight against climate change and inequality (so it’s not about the pandemic then). In contrast, the joint statement by the G7 finance minister also stressed the need to ensure long-term sustainability of public finances. 

The US and the EU are now backing a “renewed” push into investigating the origins of Covid-19. “Renewed” is incorrect terminology given there was effectively no investigation into the origins in the first place. Apathy to the origins of the virus have been mind-blowing. The source of the virus matters, both from an accountability perspective and the prevention of future pandemics. Both are calling for more transparency from China, which is unlikely to happen. 

The European Union is said to be ready to consider tougher retaliatory measures against the UK should post Brexit obligations regarding Northern Ireland not be implemented.  

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Aussie inflation print gives the RBA more room

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. https://www.macarthurwealth.com.au
A mixed week for equity markets with the US market trending a little higher whilst other markets were flat to slightly lower. 

Of the more than half of the US’s largest 500 listed companies that have reported so far, 87% have beaten analysts’ earnings estimates, with one data provider now predicting a 45% jump in profit growth. 

In local equity markets, AMP said it will spin off and list the private markets part of AMP Capital, AMP’s funds management arm. Private markets relates to both infrastructure and property. The proposed demerger comes after a part asset sale of the business fell through. The demerger is expected to be completed in 1st half 2022. 

Health insurer NIB said they had a 3.7% increase in Australian health insurance customers since the start of the financial year and that there were fewer claims than expected. The strong result more than offset declines in travel-related insurance. 

Tabcorp has received a $3.5 billion offer for its wagering business. The improved offer from the UK based sports betting group Entain, which owns Ladbrokes, was unsolicited. 

Coles reported its first drop in quarterly sales in more than a decade as spending returned to normal after Covid panic buying and lockdowns. The company reported a 5.1% drop in 3rd quarter sales to $8.76 billion. 

Retail group Premier Investments has poached current JB Hi-Fi CEO Richard Murray to take over from Mark McInnes who had decided to step down. Murray will begin in his new role from October 4, whilst his replacement at JB Hi-Fi is Terry Smart, who was the electronics retailer boss from 2010-2014. 

Link Group has confirmed that the consortium of private equity groups has withdrawn their almost $3 billion takeover proposal. The consortium made multiple offers through 2020 with the last offer being $5.40 per share. Link is preparing to sell its 44% stake in PEXA, the online property settlement platform. 

The oil price rose this week due to optimistic expectations about demand from OPEC+ and rebalancing fuel inventories in the USA. 
Australia’s consumer price inflation rose by 0.6% in the 1st quarter, lifting the annual rate to 1.1%. Transport prices were the main driver of inflation in the quarter, with modest gains in food prices. The print came in below expectations and gives the Reserve Bank of Australia continued breathing room to maintain policy support. 

The Australian university sector remains under pressure as almost every state has written off plans for international students to return to Australia as the cost of quarantine becomes an issue. New research shows that there was a 66% spike in international student enrolments over the past decade. The number of international students in the country continues to fall, whilst there has been a more than 5% decline in enrolments and a 23% decline in new students. International education is a $38 billion economy in Australia, whilst the loss of students also accounts for a missing $21 billion in spending locally. 

Australian residential property price growth has slowed this month, but the strong momentum remains. Sydney prices rose 2.3% over the last month, followed by 1.8% in Brisbane, 1.5% in Melbourne, and 0.9% in Perth. Auction clearance rates remain high. Sydney median house prices have broken through the $1.3 million mark. New figures also show that less than 5,000 loan deferrals remain outstanding – a significant improvement, but still represents more than $1.33 billion worth of mortgages. 

The US central bank left rates near 0% whilst upgrading its assessment of the economy and acknowledging that inflation is rising. But they reiterated their stance to keep policy settings accommodative. 
The US House of Representatives passed a Democrat proposed legislation that would make Washington D.C the 51st state in the US, with the house voting along party lines. The legislation effectively seeks to usurp the US Constitution and would make it easier for Democrats to win future elections given their historical support in D.C. The legislation has no chance of passing the Senate but sets the tone for the Biden/Democrat agenda. 

The virtual climate summit of 40 world leaders saw President Biden pledge more aggressive targets saying the US will aim to cut greenhouse gas emissions by 50-52% from 2005 levels by 2030 and encouraged other countries to get more aggressive. Problem is most countries don’t have the wealth of the US nor do they have a central bank able and willing to print money to finance the cost (which will be exorbitant) of meeting these targets. Each country will need to move at their own sensible pace. Australia has committed to a 26-28% reduction over the same period. In contrast, China will continue with greenhouse gas increases through to 2030. 

Australian exporters are bracing for more pressure and sanctions from the Chinese government after our Federal Government cancelled Victoria’s Belt and Road Initiative deal with Beijing. The total volume of exports to China has held up, thanks to a sky-high iron ore price, totalling $96 billion over the 12 months to the end of February. Outside of iron ore revenue, exports to China have fallen almost 30%. 

India reported the world’s highest daily tally of coronavirus cases this week as virus cases and deaths rose, not helped by poverty/living conditions, the inability to physically distance with a population of that size, and an underfunded hospital system. In Japan, 4 prefectures were in the spotlight, including Tokyo and Osaka, as the government considered short and strict states of emergency for each. Meanwhile, the European Union (EU) has said that American tourists that have been fully vaccinated will be able to visit Europe over the summer. The EU also announced that 1 in 4 people in the union have now received their first vaccine dose. Closer to home, we saw a snap 3-day lockdown in parts of WA following just two cases.  

General Advice Warning
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer
All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

Aussie equities rise as JobKeeper nears end

Need help? Contact us Macarthur Wealth Management for expert financial advice. https://www.macarthurwealth.com.au

The Aussie share market finished higher this week whilst global markets were trending lower on concerns regarding further lockdowns in Europe. 

In local stock news, Crown Resorts received an unsolicited and non-binding takeover offer of $11.85 per share, valuing the company at $8 billion. The bid came from US private equity group Blackstone. The bid looks cheap in light of Wynn Resorts’ offer of $10 billion in 2019, but recent regulatory issues at Crown have given opportunistic suitors a window. 

General insurance stocks came under a little pressure this week in light of the rain bomb which blanketed and drenched most of NSW and QLD causing widespread flooding and damage. IAG said it had received more than 8,000 claims. 

Premier Investments, owner of retailers, defended not repaying $15.6 million in JobKeeper assistance after reporting an 88% profit increase. The business posted a 1st half $188 million net profit, a strong result. 

The oil price weakened again this week as concerns arose regarding demand as rising Covid cases in Europe and slow vaccine distribution resulted in some countries increasing lockdown restrictions. There was a small reprieve in the oil price during the week after a quarter-mile long cargo ship ran aground in the Suez Canal, blocking the busy route, raising supply concerns. 

The Aussie dollar fell this week as the US dollar strengthened on an improving economic outlook and dovish rhetoric from the US central bank. A weaker iron ore price also didn’t help. 
Australia’s unemployment rate dropped to 5.8% in February, 0.5% lower than it was in January, and now sits at pre-Covid levels. The recovery has been faster than anyone expected, however, there are some concerns for the period ahead in light of JobKeeper coming to an end. 

The Australian Treasury has said that the withdrawal of JobKeeper at the end of March could see as many as 150,000 more Australians out of work, whilst more than 1 million workers were still being supported by JobKeeper at the start of 2021. 

Australian retail sales figures for February fell 1.1%, not helped by lockdowns in Victoria and Western Australia, but also a function of the significant amount of retail spending brought forward last year and some concerns regarding the ending of JobKeeper. 

The Australian population fell by 4,200 in the 3rd quarter of 2020, the first fall since World War 1. Net overseas migration detracted from the population whilst the natural increase added but wasn’t enough. Victoria and NSW saw falls, whilst all other states recorded an increase. More recent data shows that the number of returning Australians is still only half pre-Covid levels. Skills shortages will be one to watch. 

Credit rating agency Fitch has upgraded its global growth forecast for 2021 to 6.1%. The new estimate would make for the fastest worldwide expansion since 1980. US economic growth is expected to reach 6.2% for the year, in light of significant fiscal and monetary support, whilst China is planning for 6-6.5% economic growth this year. 

US labour market data showed a declining number of Americans claimed unemployment insurance, with claims dropping to a 1-year low

A busy period for central bankers of late with the Bank of Japan carving out more flexibility in its stimulus arsenal following a review of its policy framework. The US Fed pushed through a dovish message (ie. no changes to their stimulus program and no rate rises), the UK central bank talked up their economic outlook, whilst the Norwegian central bank also provided a hawkish assessment. The Turkish and Brazilian central banks hiked interest rates in order to protect their currencies (which subsequently resulted in the firing of the Turkish central bank president), whilst the European central bank President applied pressure to governments pushing them to roll out fiscal stimulus promptly. 

A key survey showed that private sector activity in the Euro area unexpectedly grew for the first time in 6 months. Manufacturing in Germany was particularly strong, no doubt boosted by Chinese economic growth, whilst factory activity in France was also higher than expected. Both manufacturing and services showed faster than forecast expansions in the UK. 
European countries including Germany, France, and Italy, have restarted using AstraZeneca’s vaccine after the European authorities gave the vaccine its endorsement. Europe is a long way behind on the vaccine front. There are threats to withhold vaccine exports to the UK given AstraZeneca is a British company with production facilities throughout Europe. The need for Europe to speed up its vaccination efforts was brought into focus by France announcing a new lockdown in several regions as well as Germany extending its lockdown. 

US-China relations appear more strained than before after officials from both countries met in Alaska for 2-days of talks that quickly descended into bickering and insults. Fair to say the Americans got embarrassed on home soil and on the global stage. Not a good look.

US President Biden also traded barbs with Russian President Putin following news that the US is considering new sanctions on Russia to block construction of the nearly completed gas pipeline from Russia to Germany. Last time I checked, Russia and Germany were consenting adults. Germany and broader Europe need the gas if they are to transition away from fossil fuels over the longer term. Fair to say the US has bigger problems closer to home like the Mexican border and re-opening their economy. 

The authors of a report on the global economic recovery have noted that whilst Australia is amongst the top spenders on Covid recovery initiatives, it has diverted very little of those funds to green projects and ranks last among the top 50 economies in its recovery. Very simply, that’s because Covid recovery efforts should have nothing to do with green projects. Covid recovery is exactly that, ie. getting households, businesses, and the economy back to where they were pre-Covid as fast as  possible. The authors also noted that we had “hitched” our economic recovery to natural gas…..considering the world can’t transition to renewables without natural gas, “hitching” ourselves to natural gas is a smart and fiscally responsible thing to do.  

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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