Investment Week In Review - 18 July 2016

By Michelle Heffernan - July 18, 2016

With the full financial year figures in, it's been a good year for US markets. Not so for emerging, European and Asian shares.

News In Review

  • Malcolm Turnbull was announced as our Prime Minister, with the Coalition claiming 76 seats and Labor 68 seats in the House of Representatives. He is due to release his cabinet line-up today.

  • Australia’s unemployment rate edged slightly higher to 5.8%. Australia added only 7,900 jobs in June overall, however the number of full time jobs added was attractive at 38,400, while part time positions fell by 30,600.

  • Theresa May was announced as new British Prime Minister, taking David Cameron’s place. May appointed key members of her cabinet, including former London Mayor, Boris Johnson. May commented that there is no chance she will support re-joining the EU, so the Brexit decision appears final.

  • In a very closely watched meeting following Brexit, the Bank of England left its key interest rate unchanged at 0.5%. The bank said it expects to further loosen policy in August after it has a clearer picture of the short-term impact the Brexit vote is having on the economy.

  • The Italian Banking System is estimated to have €200 billion of bad debts and €124 billion in likely defaults, as well as various other non-performing loans. Overall, approximately 17% of Italian bank loans are bad, or roughly 25% of Italian GDP. Talks of a bailout or support package are rife, however this may be against the EU guidelines.

  • The US June Producer Price Index report came in significantly firmer than expected, rising 0.5% which lifted the annual inflation rate to 0.3%. 

  • The potential for conflict in the South China Sea heightened after an international tribunal rejected China’s claim to the South China Sea, and found the claim to sovereignty had no legal basis. China’s Foreign Ministry stated the decision is invalid and has no binding force.

  • The number of Chinese tourists visiting our shores rose to a record 1.4 million this year, up 21% from the previous year.
    China’s CPI and PPI reports for June showed that consumer and producer inflation is continuing to decelerate, which provides the Chinese government more leeway to pursue stimulus policies amid the economy’s transition from government investment to domestic consumption based growth.

  • Despite global worries about its declining growth rate, China's economy has defied expectations of a slowdown with GDP growth for the June quarter holding steady at 6.7%. The steadiness of the headline figure was largely attributed to the strength in the property market, which accounts for approximately one quarter of China’s economic activity. 

  • Japanese government officials strongly denied that the Bank of Japan will resort to ‘helicopter money’- an inflationary measure in which governments give cash directly to residents in order to stimulate growth. Following his landslide upper house election victory, Prime Minister Shinzo Abe’s requested the drafting of a range of fiscal stimulus measures to combat deflation and increase growth potential. Rumours are that the package could be worth JPY10 trillion.

  • The world has been shocked by another deadly terrorist attack in France, this time in the coastal town of Nice. French President Hollande has extended the state of emergency by three months after the terrorist attack in Nice.

  • A failed coup in Turkey resulted in the death of more than 290 people. The Turkish Lira dropped substantially against the US dollar after the attempted government takeover.​

Comment

While it seems there are a multitude of headwinds facing global markets, benchmark performance for the full financial year to 30 June 2016 did not reflect these headwinds in some cases. Volatility remains high with uncertainty across most asset classes. In summary, it has been a good year for US shares (the S&P500 has hit all-time highs), listed property and bonds, and not so for emerging markets, European shares and Asian shares. Full details of asset class performance are below.

The Week Ahead

  • US: The housing market index, housing starts, existing home sales.
  • Australia: RBA Board Meeting minutes.
  • UK: house price index, CPI. 
  • Europe: current account.

Company News

  • Warren Buffett donated US$2.2billion of Berkshire stock in his annual gift to the Bill & Melinda Gates Foundation.

  • Administrator McGrathNicol has released a report into the collapse of Dick Smith, blaming excess stock orders and costly expansion for the downfall of the electronics retailer.

  • Optus will refund $2.4million to 175,000 customers after failing to disclose information about mobile phone insurance.

  • AGL Energy Ltd expects lower margins for its wholesale natural-gas portfolio in the coming financial year after buying a higher-than-anticipated proportion of gas for the first quarter from the spot market and other short-term sources.

Markets in Review

 

Capital Return

   
 

Weekly

FYTD

CYTD

S&P ASX 200

3.8%

3.7%

2.5%

DOW JONES

2.0%

3.3%

6.3%

S&P 500

1.5%

3.0%

5.8%

UK FTSE100

1.2%

2.5%

6.8%

FRENCH CAC40

4.3%

3.2%

-5.7%

GERMAN DAX

4.5%

4.0%

-6.3%

JAPANESE NIKKEI

9.2%

5.9%

-13.3%

SHANGHAI COMPOSITE INDEX

2.2%

4.3%

-13.7%

$1 Australian buys you:

       
   $0.7634
£0.5683
¥5.1018
¥80.8825
€0.6859
$1.0664

 

 

 

 

 

 

ASX200 Sector Performance for the Week

ASX200 Biggest Movers for the Week

 

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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