Investment Week In Review - 20 June 2016

By Marcus Damen - June 20, 2016

Vote on Brexit to occur this Thursday, but regardless of the outcome, uncertainty will remain in the financial markets.

News In Review

  • Campaigning around Brexit came to a standstill with the murder of British Labour MP Jo Cox, an advocate for Britain to remain in the European Union.
  • As widely expected, The US Federal Reserve kept rates on hold.  It was revealed that the voting intentions of committee members cut the expectations of two interest rate rises this year to just one.  Despite the dovish implications, the headline inflation number was positive, lifting annual core inflation to 2.2%.  Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories.
  • Retail sales in the US rose strongly in May indicating that American consumers remain confident about spending.  The main source of the increase was in the clothing category, as warmer weather in May lead clothing sales up 4.3% month on month, the largest increase since 2014.  Clothing sales suffered in April as unseasonably cold weather in the northern hemisphere deterred shoppers from summer purchases. 
  • The University of Michigan Inflation Expectations survey revealed a further decline in consumer inflation expectations, with the 1 year ahead rate falling back to 2.4% and the 5-10-year rate falling to 2.3%. The latter is the lowest reading in the 50 year history of the survey.  US consumer sentiment, however, actually improved to the highest level since 2005, largely underpinned by the strength of the labour market. 
  • The Bank of England announced no change in its policy settings and signalled the most significant risks to the central bank’s forecast concern the referendum, with a vote to leave the EU having the potential to materially alter the outlook for output and inflation (lower growth and higher inflation).
  • The Bank of Japan announced no change in its policy settings, with the bank continuing to view the Japanese economy as being in “moderate expanding trend”.  The bank’s inaction coupled with the rise in the yen (following dovish Fed comments) saw the Nikkei shed 3% in value, as the market is heavily skewed towards exporting companies. 
  • The Australian Bureau of Statistics released its latest employment survey, which revealed a 17,900 rise in employment numbers and kept the Australian unemployment rate steady at 5.7%.  The survey also revealed a monthly 1.7% growth in hours worked, reversing what had been a worrying 3-month trend of lower hours worked in the Australian economy. The data showed hours worked is now just 0.49% below the all-time high in January this year. 
  • The International Monetary Fund warned that China must address soaring levels of debt and speed up reforms in its financial sector in order to avoid “serious problems down the road”, as the world’s second largest economy experiences a difficult transition from export led growth to a consumer driven economy.
  • The Westpac consumer Confidence Index fell modestly to 102.2, as May’s surprise RBA cut prompted consumers to take a dimmer view of our economic outlook.   Note that a reading above 100 indicates optimists outweigh pessimists.


If the Brexit situation wasn’t unpredictable enough already, it certainly is now following the sad and senseless murder of Jo Cox.  While her murderer was an extreme activist for the ‘Leave’ campaign, his actions appear to have hindered that movement and helped tipped the pendulum back in favour of the ‘Remain’ campaign. Also possibly helping the ‘Remain’ camp is a historic trend that often sees support grow for the status quo as a referendum nears, due to a general fear of change. The betting odds appear to be favouring this trend with a ‘Remain’ outcome being comfortably odds-on, despite the public opinion polls being much closer.  

From a financial markets point of view however, the vote on Thursday will not be the end of the uncertainty. If Britain votes to leave, there will be much uncertainty about what that means and who the winners and losers will be. Even if they vote to remain in the EU, a close vote would likely force the government to push for significant further reform of the conditions of Britain’s membership within the European Union and hence the matter could drag on for some time yet.

The Week Ahead

  • US: Markit Services PMI (Jun), New Home Sales (MoM) (May).
  • Australia: Minutes from the RBA’s June meeting will be released.
  • UK: EU Referendum – Thursday 23rd (result expected Friday in Australia).
  • Europe: Non-monetary policy's ECB meeting, Consumer Confidence (Jun).
  • China: House Price Index (May), CB Leading Economic Index (May).

Company News

  • Crown Resorts announced plans to spin off its international investments, including a $2 billion stake in Macau casino operator Melco Crown Entertainment, a move that would allow controlling shareholder James Packer to shield his Australian assets from a prolonged downturn in the Chinese gambling hub.

  • ANZ is expected to reassess its $6 billion wealth management and life insurance arm, in a move that will deepen expectations that a partial sell down is in the offing. 

  • Gold Coast based online action sports retailer SurfStitch was questioned over stock trading ahead of its share price plunge, its second ASX “please explain” in as many months.

  • The A2 Milk Company announced it expects to deliver higher operating earnings this financial year than previously forecast, driven by strong trading performance in the second half.

  • Samsung launched ‘Samsung Pay’ in Australia, and will only be available to holders of Citi and American Express issued cards.  Its point of difference to Apple and Android Pay, which use NFC (near-field communications) technology, is that Samsung Pay also incorporates magnetic secure transaction (MST) technology, which replicates the magnetic strip swipe on credit cards and means every terminal can support it. 

Markets in Review


Capital Return





S&P ASX 200








S&P 500

























$1 Australian buys you:








ASX200 Sector Performance for the Week

ASX200 Biggest Movers for the Week


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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