Pitcher Partners' wrap up of issues impacting the markets over the last week.
News in Review
The American economy grew at an annualised pace of 1.9%, which was slightly lower than the expected 2.6%. Trump responded saying he will target 4% annual growth during his period of service as President.
Trump met with UK Prime Minister Theresa May to discuss a new bilateral trade deal following Brexit. Trump pushed for an ‘America first’ outcome, while May stated that any trade agreement would place Britain’s interests ahead of the US.
Trump has put a four month hold on allowing refugees into the US, and a temporary ban on travellers from Syria and six other Muslim-majority countries. Protests broke out in response.
The number of individuals who filed for unemployment claims rose by 22,000 but remain at the lowest levels since 1973, suggesting that US employers are confident enough to retain their workers.
Europe & the UK
In a vote of 8-3 the UK Supreme Court has ruled that an Act of Parliament is required to authorise the government to give notice under Article 50 of the Lisbon Treaty of the UK to withdraw from the European Union. In addition, the court ruled that the consent to proceed of the legislatures of Scotland, Northern Ireland and Wales is not required under the devolution settlements.
Eurozone consumer confidence rose slightly less than expected in January, though improved from December. There was a consistent improvement in confidence throughout 2016 and the January reading is the strongest since April 2015.
Australian leaders appeared to show support for Trump’s immigration ban, with Treasurer Morrison stating Trump was simply fulfilling election promises, Prime Minister Turnbull discussing the deal in a phone call with Trump, and Australian airlines Qantas and Virgin Australia instructing staff to refuse access to the US where appropriate.
Headline Consumer Price Index (CPI) rose a moderate 0.5% in the December 2016 quarter, down from 0.7% in the September quarter leaving the annual inflation rate at just 1.5%. This CPI number could encourage the RBA to leave rates on hold for the next few months as the current level is well below the Reserve Bank's 2-3% target.
Profits at China’s industrial firms rose by 2.3% in December from a year earlier, taking the 2016 annual growth rate to 8.5% and reversing the 2.3% growth decline seen in 2015.
Trump’s first weeks have seen a whirlwind of activity. Some controversial and sparking international backlash, and some positive. While his term thus far dominates daily headlines, there continues to be other global factors at play with the potential to impact markets. The UK Supreme Court ruling that an Act of Parliament is required to proceed with Brexit may limit the government’s ability to ram through a ‘hard Brexit’, which would likely be good news for UK businesses (particularly financial services). UK Parliament are working through this curveball now with hopes for a quick resolution.
The Week Ahead
US: Federal Open Market Committee Rate Decision (FEB 01), ISM Manufacturing (JAN), Change in Non-farm Payrolls (JAN)
Australia: Trade Balance (Australian dollar) (DEC), Building Approvals (YoY) (DEC)
German insurer Allianz is reportedly in informal talks about the potential acquisition of QBE Insurance.
Brambles fell 14% after it warned of lower-than-expected revenue and earnings growth as a result of lower pallet use in the US.
MacMahon Holdings rejected CIMIC Groups’ proposed $174 million takeover offer, saying it does not represent fair value of the business and urged its shareholders to take no action.
Resmed reported a 17% rise in sales to $US530.4 million for the second quarter of 2017, well ahead of analysts’ forecasts.
Alphabet (Google) beat revenue expectations in their end of fiscal year results, but net earnings were lower than expected. Reports focused on their move into the cloud space.
Markets in Review
S&P ASX 200
SHANGHAI COMPOSITE INDEX
ASX200 Sector Performance for the Week
ASX200 Biggest Movers for the week
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