Investments Week in Review - 9 January 2017

By Marcus Damen - January 10, 2017

Happy New Year! We hope you have enjoyed (or are still enjoying) a nice break over the festive season and we look forward to working seeing you again in 2017. While this bulletin usually covers activities, announcements and movements of the preceding week, this issue covers these items from the day that our office closed on 23 December 2016 to when it reopened on 9 January 2017.

News in Review

US

  • Non-farm payrolls data showed a gain of 156,000 jobs in December and a slight increase in the unemployment rate to 4.7%, from 4.6% as a result of the participation rate ticking back up slightly.  The biggest gains were in healthcare services and food and drink services adding approximately 30,000 jobs each.
  • Real gross domestic product (GDP) increased at an annualised rate of 3.5% in the third quarter of 2016, according to the third and final estimate. This was above market forecasts of 3.2% and above the second quarter result of 1.4%.
  • Consumer Confidence reached 113.7 according to the December survey. This result is the highest seen since August 2001. The increase has been linked to increasing optimism in the economy.
  • Manufacturing expanded at the fastest pace in two years with the Purchasing Managers Index (PMI) increasing to 54.7 for the fourth month of consecutive advances.
  • Non-manufacturing PMI showed a steady result of 57.2 the same as November. Many sectors provided details that there was still business growth although at a slower rate.

Europe & the UK

  • The UK current account deficit for the third quarter of 2016 was £25.5 billion greater than the second quarter’s deficit of £22.1 billion.
  • The UK’s manufacturing PMI rose to a two and a half year high of 56.1. This rise came from strength in new orders received, particularly from overseas clients taking advantage of the recent weakness in the sterling.
  • A similar story in UK’s construction PMI growing for the sixth consecutive month to reach 54.2. With the main contributor being residential house building.
  • The UK’s services PMI also increased strongly to 56.2 in comparison to previous month’s result of 55.2. The index is being supported by growth in new work and employment rising.

Australia

  • Australia’s trade balance took the market by surprise by showing a positive figure of $1.24 billion, the first positive figure two years. This was largely driven due to increased exports in rural good and commodities.
  • The amount of building approvals increased by 7.0% for November, when being seasonally adjusted. This is predominately driven by a strong rise in total dwellings excluding houses.

China

  • China’s manufacturing PMI was stable with a result of 51.4. This is slightly lower than market expectation of 51.6 and previous month result of 51.7.

Comment

The global stock markets finished 2016 with a positive bang and have carried the momentum into 2017 so far.   This is quite a contrast to last January which saw heavy losses in the first week, however as was the case in 2016, the returns of the first week of trading provide little or no predictive value for the remainder of the year.   Just as last year experienced significant volatility and ended on the opposite note to which it began, so too could 2017.  

There is not much we can guarantee about 2017, other than it will be a fascinating year.  Whether we like it or not, Donald Trump will demand much of the world’s attention this year.   He clearly wants to try many new things (or old tricks that haven’t been tried for a while).  Some will get through Congress.  Some won’t.  Some will work, some won’t.  But rather than get caught up in the short term hype and excitement of what may occur in the near term, we must remain focussed on the underlying fundamentals of the economy and financial markets and consider the sustainability of any rally or change.  It will also be very important not to ignore what is happening outside of the United States and to keep a good handle on the risks and opportunities across the globe.   Surprises always come from the areas in which you are not looking.   

The Week Ahead

  • US: CPI m/m, Building permits.
  • Australia: Unemployment rate.
  • China:  GDP, Industrial Production.
  • Europe: Minimum bid rate.
  • UK: CPI, Average earnings.

Company News

  • Woolworths agreed to sell 527 if its petrol stations to BP for $1.8 Billion. BP outbid competitor Caltex and when the deal is finalised will have approximately 39% of the market share. The deal is not expected to be approved and finalised until early 2018.
  • CSL announced that the European Commission has granted them marketing authorisation for CSL Behring’s AFSTYLA, the first and only single-chain product for haemophilia A.

Markets in Review (23-Dec-16 Closing to 6-Jan-17 Closing)

 

Capital Return

   
 

Weekly

CYTD

FYTD

S&P ASX 200

1.6%

1.6%

10.0%

DOW JONES

1.0%

1.0%

11.3%

S&P 500

1.7%

1.7%

8.5%

UK FTSE100

0.9%

0.9%

10.9%

FRENCH CAC40

1.0%

1.0%

15.9%

GERMAN DAX

1.0%

1.0%

19.8%

JAPANESE NIKKEI

1.8%

1.8%

24.9%

SHANGHAI COMPOSITE INDEX

1.6%

1.6%

7.7%

ASX200 Sector Performance (23-Dec-16 Closing to 6-Jan-17 Closing) 

ASX200 Biggest Movers (23-Dec-16 Closing to 6-Jan-17 Closing)

$1 Australian buys you:

Security

LastPrice

AUDUSD

0.7309

AUDGBP

0.5982

AUDCNY

5.0670

AUDJPY

85.8630

AUDEUR

0.6942

AUDNZD

1.0507


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