Investment Week in Review - 6 March 2017

By George van Deventer - March 6, 2017

Pitcher Partners' wrap up of issues impacting the markets over the last week.

News in Review

Australia

  • Australia has avoided a second consecutive quarter of negative economic growth and thus a technical recession, as GDP beat market expectations by rising 1.1%, taking the annual rate to 2.4% in 2016. Treasurer Scott Morrison responded cautiously, telling reporters that while he welcomed the result, the nation’s economic growth “cannot be taken for granted and is not being experienced by all Australians in all parts of the country in the same way”, referring to the impact of record-low wage growth.
  • Australia’s current account deficit narrowed to $3.85 billion, or just 0.9% of GDP, in the December quarter thanks to a sharp improvement in the balance on goods and services. The improvement is largely a function of the substantial rally in export commodity prices whilst subdued growth in domestic demand helped to quell imports.
  • The Victorian Government announced some important changes to stamp duty over the weekend targeted at increased housing affordability. Pitcher Partners' Tax Consulting division will provide further information on this announcement. 

US

  • Orders for durable goods rose 1.8% in January after two months of declines. The strength in January stemmed from a surge in demand for commercial and military aircraft.
  • Consumer confidence unexpectedly increased in February to the highest level since July 2001 as Americans are more upbeat about present and future conditions. Economists believe the 15 year high in confidence is mainly attributed to the health of the labour market and the pro-growth policies touted by President Trump. 
  • The US economy grew in the fourth quarter at an unrevised 1.9% pace, as slower investment by businesses and state and local agencies offset stronger household purchases.

Europe & the UK

  • Eurozone consumer price inflation increased to a new four-year high expected in February thanks to a surge in energy and food prices. Underlying price pressures, however, remain subdued, with core CPI, which excludes more volatile prices such as energy, remaining at 0.9%, which was in line with market expectations.
  • Growth in the UK's manufacturing sector fell to a three-month low in February as the Markit UK PMI manufacturing index declined to 54.6 in February, against 55.9 in the previous month. Despite the decline, the growth rate is still in expansionary territory and remains comfortably above the long-run averages.

China

  • President Xi Jinping vowed to tighten regulations to control risks in financial markets arguing that a system should be set up to coordinate financial regulations to safeguard against systemic risks. He also ordered that the pace of economic reforms be sped up.

Comment

After a volatile week, Australian stocks ended the week largely where they started as a raft of global data was processed by our market. Emphasis was on positive local trade and GDP data, which were supported by a resurgence in commodity prices, providing a windfall to national income. Further, resurgent consumption teamed with government investment also supported last quarter’s expansion, keeping the economy on track to meet the Reserve Bank of Australia’s target of 3% annual growth later this year.

The Week Ahead

  • US: Change in Non-farm Payrolls (FEB), Unemployment Rate (FEB)
  • Australia: Reserve Bank of Australia Rate Decision (MAR)
  • China: Consumer Price Index (YoY) (FEB)
  • Europe: European Central Bank Rate Decision (MAR)
  • UK: Industrial Production (YoY) (JAN)

Company News

Snap Inc., the parent company of Snapchat, experienced a spectacular debut on the NASDAQ, soaring 44% in its first day of trading. Despite questions about corporate governance and profitability the market valued the disappearing-photo app maker at more than $28 billion.

Shares in WorleyParsons surged 30% after Dubai-based consulting firm Dar Group emerged with a 13.35% stake in the engineering services company and confirmed it had made an indicative bid last year but was knocked back. 

QBE reported $898m cash profit (up 12% on a constant currency basis). The results was supported by an approximate $100m foreign exchange gain in Investment income. QBE has announced a three-year cumulative on-market share buyback of up to A$1bn with a current target of not more than A$333m in any one calendar year (approximately 2% of shares per year).

Lend Lease reported a first half operating profit after tax of $394.8m, largely in line with estimates.

Markets in Review

 

Capital Return

   
 

Weekly

CYTD

FYTD

S&P ASX 200

-0.2%

1.1%

9.5%

DOW JONES

0.9%

6.3%

17.2%

S&P 500

0.7%

6.4%

13.5%

UK FTSE100

1.8%

3.2%

13.4%

FRENCH CAC40

3.1%

2.7%

17.9%

GERMAN DAX

1.9%

4.8%

24.2%

JAPANESE NIKKEI

1.0%

1.9%

25.0%

SHANGHAI COMPOSITE INDEX

-1.1%

3.7%

9.9%

ASX200 Sector Performance for the Week  

ASX200 Biggest Movers for the week 

$1 Australian buys you:

Security

LastPrice

AUDUSD

0.7555

AUDGBP

0.6162

AUDCNY

5.2116

AUDJPY

86.3060

AUDEUR

0.7184

AUDNZD

1.0739

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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