Investment Week In Review - 10 October 2016

By Marcus Damen - October 10, 2016

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

News in Review

  • The Reserve Bank of Australia decided to leave the Cash Rate unchanged at 1.5% on Tuesday, citing slow global economic growth with improving labour market conditions.
  • The US economy added 156,000 jobs in September, down slightly from August (which was revised up to 167,000 from 151,000) and the unemployment rate ticked up to 5% from 4.9%. Wages rose 2.6% year on year.
  • A video containing lewd comments from Donald Trump was released into the public arena and the outrage sparked calls from key Republicans for him to quit the presidential race. The Donald insisted he is going nowhere.
  • Australian Building Approvals fell slightly in August (down 1.8%), proving more resilient than both the consensus of a 6% fall. This was only a slight correction after the 12% surge in July.
  • Australian Retail Sales exceeded expectations in August, increasing by 0.4% and delivering a welcome bounce after a run of weak readings. The pick-up was heavily reliant on spending in department stores on the east coast. Four of the six major categories reported weaker results in August and annual growth in retail sales remains below 3%.
  • Australia's trade gap has shrunk instead of a predicted rise but remains deep in the red. The August trade deficit came in at $2.0bn, following a deficit of $2.1bn in July. Economists had tipped a widening in the trade gap to $2.3bn. Exports were flat in the month at $26.9bn, and there was also no growth in imports which came in at $28.9bn.
  • The U.S. trade deficit unexpectedly widened in August, as higher imports of capital goods and record purchases of services from abroad overshadowed a gain in exports. The gap grew by 3% from the prior month to US$40.7 billion.
  • The US Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) jumped to its highest level in almost a year, exceeding market expectations for a 53.0 read to come in at 57.1. It's difficult to pinpoint why both the ISM Manufacturing and Services PMIs took such a dive in August, but it does look to have been temporary with the September data supportive of a December rate rise from the US Federal Reserve.
  • UK industrial production fell by 0.4% in August, official figures have shown, partly due to a drop in oil and gas production, and manufacturing rose 0.2% following a steep fall in July. Separate figures from the ONS showed that the UK's trade deficit widened in August, despite the weaker pound.
  • The Eurozone’s Manufacturing PMI accelerated in September to 52.6 points, up from 51.7 points in August, while that of the UK posted a healthy 55.4 points for the month, up from 53.4 in August.
  • Japan's confidence improved for the second straight month in September, rising to 43.0, the highest level in three years, defying economists' expectations for a decrease to 41.5 from 42.0 in August.

Comment

While Donald Trump has done and said many offensive things in the past and in this presidential campaign, the video released this week seems to have hit a nerve with the public and key Republicans more than any other incident to date and it appears to have significantly boosted the likelihood of a Hillary Clinton win.

While this is probably a good outcome in terms of US stewardship, global politics and financial market volatility in the short term, Donald Trump has shone a torch on some significant issues in the US economy that will not disappear quickly, even if he withdraws from the presidential race or loses the election. 

The Week Ahead

  • Australia: NAB Business Confidence survey results are expected.
  • US: The Federal Reserve will release the Minutes of its last Meeting; Retail Sales and Producer Price Index data for September will be released; Fed Chair Janet Yellen will present at the Federal Reserve Bank of Boston’s Annual Research Conference. 
  • Europe: Economic Sentiment data is due.
  • China: Trade Balance and Inflation data for September is due. 

Company News

  • Bank of Queensland recorded a 1% cash profit increase ($360m), while its statutory earnings lifted 6% to $338m. The figures fell shy of market expectations for a cash profit of $362.8m and statutory profit of $349.4m, although revenue of $1.12bn was exactly in line with forecasts.
  • National Australia Bank announced that it has completed the sale of 80% of its life insurance business to Nippon Life for A$2.4bn. NAB now expects the loss on sale to be $100-200m greater than previously expected.
  • Troubled German investment bank Deutsche Bank AG cut another 1,000 jobs last week and (according to Bloomberg) is in informal talks with securities firms to explore options including raising capital should mounting legal bills require it. Deutsche is fighting a fine of up to US$14 billion from the U.S. Department of Justice.
  • Nickel posted the biggest loss in three weeks as supply concerns eased amid speculation that Philippine mines could avoid shutdowns after a government audit of producers. The potential for increased Nickel supply caused shares of Western Areas Ltd to slide last week.

Markets in Review

 

Capital Return

 

Weekly

FYTD

CYTD

S&P ASX 200

0.6%

4.5%

3.2%

DOW JONES

-0.4%

1.7%

4.7%

S&P 500

-0.7%

2.6%

5.4%

UK FTSE100

2.1%

8.3%

12.8%

FRENCH CAC40

0.0%

5.0%

-4.0%

GERMAN DAX

-0.2%

8.4%

-2.3%

JAPANESE NIKKEI

2.5%

8.2%

-11.4%

SHANGHAI COMPOSITE INDEX

0.0%

2.6%

-15.1%

 

ASX200 Sector Performance for the Week

ASX200 Biggest Movers for the Week

$1 Australian buys you:

   $0.7576
£0.6082
¥5.0526
¥78.6615
€0.6815
$1.0612

 

 

 

 

 

 

 

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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