Markets enjoyed a stronger week last week as the highly unpredictable Chinese market re-opened much more resilient than expected from its New Year holiday.
News in Review
Australia’s unemployment rate climbed to 6.0% in January as full-time employment slumped by the most since 2013, reflecting waning stimulus from record-low interest rates and a weaker currency.
The cost of living in the US excluding food and fuel (Core Consumer Price Index) increased in January by 0.3%, the most in more than four years, reflecting broad-based gains that signal companies may be getting some pricing power.
Japan's economy contracted at an annualised rate of 1.4% in the December quarter, hurt by weak private consumption and housing investment. The preliminary figure for Gross Domestic Product compared with the median estimate of a 1.2% contraction in a Reuters poll of economists. It followed a revised 1.3% gain in the September quarter.
China’s Consumer Price Inflation continued to climb while factory-gate deflation moderated, signalling that demand is beginning to stabilise. The Consumer Price Index (CPI) rose 1.8% in January from a year earlier, while the Producer Price Index fell 5.3%, extending declines to a record 47 months. Easing deflationary pressures offer some relief for policy makers as they battle to underpin demand while tackling overcapacity.
Overseas shipments in China declined 6.6% in January in Yuan terms from a year earlier, compared with a 2.3% increase in December. Imports extended a stretch of declines to 15 months, falling 14.4%, leaving a trade surplus of 406.2 billion yuan (AUD$87.2 billion). Producer Price Index.
European Central Bank (ECB) President Mario Draghi told the European Parliament that the ECB is “ready to do its part” but that in order to make "the euro area more resilient, contributions from all policy areas are needed."
Inflation in the U.K. edged up to its highest rate for a year last month as rises in the price of alcohol and clothing pushed up the cost of living. The CPI rose to 0.3% in January from 0.2% in December while the unemployment rate remained steady at 5.1%.
Brent oil settled lower on Thursday after data showing U.S. crude inventories rose to record highs overshadowed production freeze plans by oil major producers that had sharply boosted the market this week.
Markets enjoyed a stronger week last week as the highly unpredictable Chinese market re-opened much more resilient than expected from its New Year holiday. The Japanese market had fallen by more than 10% in the week that the Chinese markets were closed and there were some fears that last Monday’s open could be very weak on the Shanghai exchange. The People’s Bank of China were no doubt anticipating this as they provided some very comforting words to the markets on the Sunday before re-opening, soothing concerns about further surprises in relation to the devaluation of the Yuan. These comforting words seemed to work and the Chinese markets opened reasonably stable. As the week progressed the expectations for further global stimulus increased due to weak economic data in Japan and more promises from ECB President Draghi.
While the stronger week was a pleasant change to the recent mood of the markets we are likely to see a high level of volatility and uncertainty while economic data points remain weak and the doubts remain as to the effectiveness of stimulus programs.
Locally, this week will be the biggest week of the corporate reporting season and will shed some light on to how companies have been handling the recent pressures and what their outlooks are.
The Week Ahead
US: Preliminary Gross Domestic Product for the December quarter; Confidence Board Consumer Confidence; US Existing Home Sales; Durable Goods Orders.
Australia: Private Capital Expenditure; Wage Price
UK: Second estimate Gross Domestic Product for the December quarter.
Telstra Corporation’s interim profit rose to $2.093 billion for the six months through December, a 0.4% increase on the same period last year. Revenue rose 9.1% with income growth across all segments of the business. However its operating expenditure exceeded this growth, rising 14%.
Sydney Airport has signalled that it intends to increase its generous dividends on the back of strong passenger numbers. Its profit after tax for the year ending 31 December came in at $283 million, which was markedly higher than the prior year’s result of $59.1 million. Total passenger movements increase 3% to 39.7 million people. With international passengers rising 4.3% during the year.
Suncorp Group has unveiled a number of changes to its company structure following a slide in the insurer’s profitability and questions over the sustainability of the company’s dividend. The firm indicated that it would be streamlining its business into three arms, Banking and Wealth to be led by John Nesbit, Insurance Australia led by Anthony Day and Insurance New Zealand by Paul Smeaton. Each division will have end to end responsibility for product design, manufacturing and claims management. The changes will be effective from the start of March.
Woodside Petroleum logged a net profit of just $26 million (USD) for the 12 months to December, its lowest result since 2002. The result was due to a $1.1 billion (USD) write-down after the company impaired its asset following the sustained decline in the global oil price. Excluding one off items, net profit after tax for the year came in at $1.126 billion and revenues fell 32.3% to $5.03 billion (USD).
Markets in review
S&P ASX 200
SHANGHAI COMPOSITE INDEX
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Biggest winners and losers last week - by sector
Biggest winners and losers last week - by company
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