Investment Week In Review - 12 December 2016

By Michelle Heffernan - December 12, 2016

Pitcher Partners Investment Services' wrap up of news and current affairs impacting the markets.

News in Review

  • Oil prices jumped up last week when OPEC agreed to curb production but commentators were quick to caution that this production curb still faces many hurdles.  
  • The US services sector continued to show strength with the Institute of Supply Management (ISM) reported its Non-Manufacturing Purchasing Manager's Index (PMI) rose to 57.2 last month from 54.8 in October. This was the 82nd consecutive month of growth and the highest reading since October 2015. 
  • The JOLTS job opening report revealed that there were 5.543 million job openings in the US during October, marginally lower than the 5.631 million reported in September.  
  • Italian Prime Minister Matteo Renzi resigned following the failed referendum; 59.1% of Italians voted against the proposed constitutional changes.
  • Austria elected a former leader of the Green Party, Alexander Van der Bellen, as their new President.
  • While ECB President Mario Draghi announced that from 1 April 2017 the ECB will reduce the pace of asset purchases to 60 billion euros per month, he also stressed that this was not the start of tapering and that the extension will run a full nine months. Perhaps more importantly, Draghi stressed that the ECB was committed to increasing the size of QE again and/or extending the programme further if downside risks to the improved macro outlook materialize and if inflation in the Eurozone falls short of the 2% target.
  • Growth in British retail sales slowed in November after a bumper October as shoppers waited for big discounts around 'Black Friday' at the end of the month. Robust growth in consumer spending has been one of the main factors sustaining Britain's economy since June's vote to leave the European Union.
  • Australia’s GDP contracted 0.5% in the September quarter of 2016. The unexpectedly poor result is Australia's first quarterly decline since 2011 and the steepest since the GFC, but Australia’s streak of a quarter century without a recession (defined as two consecutive quarters of contraction) remains intact for now.   
  • The RBA left its policy rate at 1.5%, which was widely expected and priced in by the market. The accompanying statement struck a somewhat optimistic tone, suggesting that additional policy easing (which they continue to expect) is unlikely to come before mid- 2017. The RBA acknowledged the likelihood of a weak September GDP number, stating that “In Australia, the economy is continuing its transition following the mining investment boom. Some slowing in the year-ended growth rate is likely, before it picks up again.”
  • The average price of consumer goods in China rose 2.3% from a year earlier, above the 2.1% pace of October and forecasts for an increase to 2.2%. Reflective of surging commodity prices and previous weakness late last year, producer prices rose 3.3% from a year earlier. Chinese trade data also exceeded expectations in November, with the value of imports and exports both rising over the year.

Comment

The US market finished the week at all-time highs, in what was the strongest week since the US Election. The share market rises comes on the back of optimism that companies’ will profit in an environment of lower taxes under Trump’s proposed policies.

Over our side of the world, the Australian economy shrank by 0.5%, in what was the worst three months since 2008. After a result like this, the usual response would include the RBA cutting rates but it seems clear they are reluctant to further cut, encouraging more debt and adding further risk to our economy. 

The Week Ahead

  • US: Federal Open Market Committee Rate Decision (DEC 14), Advance Retail Sales (NOV), Consumer Price Index (YoY) (NOV)
  • Australia: Unemployment Rate (NOV)
  • China: Retail Sales (YoY) (NOV)
  • Europe: Euro-Zone ZEW Survey (Economic Sentiment) (DEC)
  • UK: Consumer Price Index (YoY) (NOV)

Company News

  • Origin Energy announced that it is planning an initial public offering of its Australian and New Zealand conventional upstream exploration and production operations in an effort to focus its business and accelerate debt reduction.
  • Mr Trump accused Boeing of trying to rip off taxpayers, claiming the cost to build two Air Force One aeroplanes for the government would blow out to more than $US4 billion ($5.4 billion). Trump pressured the aircraft manufacturer through Twitter.
  • Ardent Leisure Group reopened its Dreamworld theme park after an extended close down period following the tragic deaths of visitors on the Thunder River Rapids ride.

Markets in Review

 

Capital Return

   
 

Weekly

FYTD

CYTD

S&P ASX 200

2.1%

6.3%

5.0%

DOW JONES

3.1%

10.2%

13.4%

S&P 500

3.1%

7.7%

10.5%

UK FTSE100

3.3%

6.9%

11.4%

FRENCH CAC40

5.2%

12.4%

2.7%

GERMAN DAX

6.6%

15.7%

4.3%

JAPANESE NIKKEI

3.1%

22.0%

-0.2%

SHANGHAI COMPOSITE INDEX

-0.3%

10.4%

-8.7%

ASX200 Sector Performance for the Week

ASX200 Biggest Movers for the Week

$1 Australian buys you:

   $0.7447
£0.5924
¥5.1476
¥85.9745
€0.7073
$1.0448

 

 

 

 

 

 
 
Disclaimer
This material is intended for the use of the clients of Pitcher Partners Investment Services only. It is current at the date of preparation, but may be subject to change. This document does not constitute financial product advice. It is of a general nature and has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on the information you should consider the appropriateness of it having regard to your objectives, financial situation or needs and seek independent advice. You should obtain and consider a Product Disclosure Statement in relation to any financial product before making any decision about acquiring the product. To the maximum extent permitted by law, Pitcher Partners Investment Services Pty Ltd and its representatives will not be liable for any loss or damage incurred by any person directly or indirectly for any use or reliance on this document.

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