Investment Week in Review - 14 March 2017

By Marcus Damen - March 14, 2017

Pitcher Partners' wrap up of issues impacting the markets over the last week.

News in Review

Australia

  • The RBA held the cash rate unchanged at 1.5% for the sixth straight meeting, as broadly expected.
  • Australia’s month on month retail sales increased by 0.4% in January after falling 0.1% in December in seasonally adjusted terms. The main contributors being household goods (+1.4%) and cafes, restaurants and takeaway food services (+1.1%).
  • Home financing in Australia rose unexpectedly in January. The number of home loans issued by Australian authorities rose by a seasonally adjusted 0.5% in January, following a gain of 0.4% gain the previous month. Analysists had forecast a month on month decline of 0.9%.

US

  • Non-farm payrolls increased by 227,000 in February, beating analyst forecasts of roughly 170,000, while wages increased 0.2% and January wages growth was also revised upwards to 0.2%.
  • The unemployment rate decreased slightly (to 4.7%) from the previous month, in line with expectations. The employment number was led by most leading industries except retail trade employment which edged down for the period.

Europe & the UK

  • The British parliament released their annual budget on Wednesday morning outlining the spending plans for the year ahead. The main take away points were an increase in social funding in order to combat the aging population and a relief for some businesses facing a large increases in taxes. Overall, the budget delivered was lowering spending and borrowing as Britain plans for a potentially arduous Brexit.
  • Britain announced that month on month manufacturing fell by 0.9%, worse than the  expected 0.6% drop. This is in comparison to a 2.2% increase from the previous month. The leading cause of the drop was a fall of 13.5% manufacturing in Pharmaceuticals which is typically a volatile sector.
  • The European Central Bank (ECB) maintained their benchmark interest rate of 0% for the time being. The bank announced they would be continuing to purchase assets at a lowered rate from April (down to 60 billion Euro per month) with plans of maintaining the stimulus for the remainder of the year

China

  • China’s consumer price index (CPI) advanced 0.8% in February from a year ago, after climbing 2.5% in January. This was lower than the expected result of 1.9%. On a monthly basis CPI inflation declined by approximately 0.2%.
  • Producer prices, however, rose by the greatest amount (7.8% year on year) since the September 2008.
  • The trade balance came in below expectations for February with a negative balance of 60 billion yuan. Analysts had expected a positive balance of 173 billion yuan. This came as China’s imports increased by 45% on a year on year analysis

Comment

The divergence between Chinese consumer prices and producer prices is fascinating and an issue to be quite mindful of. If price pressures for producers are rising sharply but are not being passed through to consumers, then margins are being squeezed and this is not likely sustainable. Should price pressures continue, then these would be expected to flow through to consumer prices at some point and could drive inflationary pressures to all of China’s global customers. Further weakness in the yuan could help alleviate this issue, however a pickup in inflation could bring some upwards pressure to the yuan, eliminating this cushion.  

The Week Ahead

  • US: Fed funds rate, Retail sales m/m, CPI m/m
  • Australia: Unemployment rate
  • China: Industrial production y/y
  • Europe: ECB President speech
  • UK: Official bank rate, Monetary policy summary

Company News

After the ACCC paper on the merger of Tabcorp and Tatts which stated the concerns about electronic gaming machines, Tabcorp has committed to divesting from Odyssey Gaming Services.

The Big Four banks heads were brought before a committee in parliament during the week, with the focus being on wealth management businesses and in particular insurance arms of these. The committee continues to look into the mismanagement of claims by insurers.

Ardent Leisure announced that their earnings were down 35% for February which shows an increase from January’s announcement of a 50% decline in revenue. Attendance was also down 33% for February.

Markets in Review

 

Capital Return

   
 

Weekly

CYTD

FYTD

S&P ASX 200

0.8%

1.9%

10.4%

DOW JONES

-0.5%

5.8%

16.6%

S&P 500

-0.4%

6.0%

13.0%

UK FTSE100

-0.4%

2.8%

12.9%

FRENCH CAC40

0.0%

2.7%

17.8%

GERMAN DAX

-0.5%

4.2%

23.6%

JAPANESE NIKKEI

0.7%

2.6%

25.9%

SHANGHAI COMPOSITE INDEX

-0.2%

3.5%

9.7%

ASX200 Sector Performance for the Week  

ASX200 Biggest Movers for the week 

$1 Australian buys you:

Security

LastPrice

AUDUSD

0.7521

AUDGBP

0.6185

AUDCNY

5.1987

AUDJPY

86.7780

AUDEUR

0.7095

AUDNZD

1.0882

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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