stocks

Markets buoyed by US stimulus bills

Need help? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Local and global equity markets rose strongly this week buoyed by strong company earnings results, the passage of the US infrastructure bill, and progress on the bigger budgetary bill. 

Analysts now expect 2nd quarter profit growth of 93% for the 500 largest US companies. With their quarterly reporting season almost complete, 87% of companies have beat analyst expectations, which is the highest beat on record. 

In local stock news, general insurer Suncorp improved full-year cash earnings by 42% with shareholders to receive a special dividend, whilst the company will also undertake an on-market stock buyback. 

Toll road operator Transurban revealed that the costs of the West Gate tunnel project in Melbourne have blown out by about $3.3 billion. The company reported statutory profit of $3.27 billion. Lockdowns in Sydney, Brisbane, and Melbourne have reduced the number of cars on the road and have weighed on revenue. 

Commonwealth Bank of Australia released its 2021 financial year results reporting a $1.4 billion increase in cash profit to $8.7 billion over the last 12 months, an almost 20% increase. The bank also announced a $6 billion off-market stock buy-back. 

The gold price had fallen sharply over the last week and half before mounting somewhat of a recovery in the last few days. A stronger US dollar along with the continuing economic recovery and expectations of the US central bank paring back its stimulus program have all put downward pressure on the gold price of late. 

The iron price has continued to fall from its lofty heights following a report which said that China wants to limit steel makers’ impact on its environment, which made investors reassess their expectations for iron ore demand. 
The Reserve Bank of Australia has revised its economic growth forecast down to 4% for 2021 but has kept their forecast for unemployment at 5% for the same period. They did revise their unemployment forecast for 2022 down to 4.25% and left their inflation forecasts unchanged at 1.75% for 2022 and 2.25% for 2023. 

The negative impact of lockdowns have begun to rear their ugly head, putting aside the societal issues, as more than 15,000 home and business owners were unable to repay their loans in July. In addition, an additional 150,000 Australians became unemployed last month according to Roy Morgan. Their latest data showed the bulk of the job losses came from part-time work whilst 61,000 full-time workers also became unemployed. 619,000 workers are now looking for full-time work whilst 803,000 are looking for part-time work. 

July saw the National Australia Bank business confidence index and business conditions fall sharply, which isn’t surprising given the size and extent of lockdowns in a number of states. Australian consumer sentiment fell by more than 4% in August as consumers’ fears of unemployment rose sharply. 

US consumer prices for July rose at its slowest pace in the past 5 months as some price increases have subsided on the back of softening demand and increased supply. Even so, the July inflation number of 0.5% is still quite high, with the annual rate at 5.4%, as demand pressures and supply issues remain. 

US nonfarm payrolls increased by 943,000 jobs last month a Labor Department report showed. Economists had forecast payrolls would increase by 870,000. The report also showed strong wage gains as employers competed for scarce workers as many workers remain at home collecting overly generous unemployment benefits. The unemployment rate also dropped to a 16 month low. 

The US central bank had contrasting rhetoric from a couple of members this week with one suggesting that the US should be well past the pandemic crisis before the central bank raises rates. Another member said high inflation this year may have already met one of the bank’s benchmarks for raising rates. 

The Germans have again warned that inflation in the Euro area could pick up faster than expected and urged the European central bank not to drag out their emergency bond-buying program.   

A gauge of investor expectations for the German economy plunged to 40 from 63 points in July as fears about the impact of the delta variant gather pace. 

Chinese economic data showed exports rising by 19% in July on the same time last year, coming in just under expectations, whilst imports were up 28% on the same time last year, also coming in below expectations. 

China’s central bank has fanned expectations of further monetary policy easing, saying in its latest quarterly report that inflation pressures are controllable whilst highlighting risks to the economic growth outlook. 
The US Senate voted to progress the US$1 trillion infrastructure bill with 19 Republicans voting with Democrats to support the push. However, the Democrat leader of the House has said she will only bring the bill to a vote after the Senate passes a separate US$3.5 trillion bill which has all kinds of things in it, most of it Democrat election promises, which the Democrats will likely look to push through via a process called reconciliation (ie. without Republican support). The debt ceiling (currently at US$28.5 trillion….) with partisanship likely to make it a tough task. 

The Biden administration faced some hard truths this week as it pertains to foreign policy. A return to the Iran nuclear deal looks to be dead in the water as Iran races towards the capacity to build a nuclear bomb in light of perceived US weakness. The US will now be sending troops back into Afghanistan following an ill-advised move earlier in the year to remove US troops from the country. The country has again become a hotbed for terrorism with the Taliban carry out deadly attacks against US allies left behind. Lastly, US energy self-sufficiency is very much a thing of the past after US oil inventories got so low that President Biden had to ask OPEC+ to increase supply. US inventories are low due to increase in demand, but mainly due to government policy banning new investment in oil & gas and pipelines.  

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Equity markets fall on virus variant concerns

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Equity markets locally and globally fell this week on concerns regarding rising virus cases

In local stock news, Sydney Airport’s shares rose strongly after they received a $22.3 billion takeover offer equating to $8.25 per share from a consortium of infrastructure investors mostly made up of Australian industry super funds. The offer will be hard for the company’s board to rebuff, but markets aren’t so sure given the stock price remains well south of the offer price. 

Tabcorp will spin-off its lotteries and Keno arm as a separate ASX listed business but has chosen not to sell its wagering and media arm despite several suitors offering to pay about $3.5 billion. 

Seven Group has continued to lift their stake in Boral buying 60 million shares at $7.40 each with the company now owning almost 41% of Boral. 

The upward trend in oil prices reversed course this week on expectations that some countries may break ranks from OPEC+ production targets. The moves come after the United Arab Emirates blocked an OPEC+ deal that cartel leaders Russia and Saudi Arabia had hashed out to increase output. The Saudis and Emiratis have historically had each other’s backs. Demand is likely to remain high as the global recovery continues, whilst US supply runs low due to President Biden’s green policy. 

The Aussie dollar fell into the 74c range against the US dollar as investors sought out safe-haven currencies in light of rising Covid cases and weaker Chinese inflation data. 
The Reserve Bank of Australia held the cash rate at the record low of 0.1% as expected at their July meeting. The board also made 2 other policy announcements relating to their bond yield targeting program (ie. keeping government bond yields very low) and their bond buying program (ie. money printing) which will see them taper bond purchases from $5 to $4 billion per week until at least mid-November. They also changed their language slightly to indicate they don’t expect to lift rates until 2024 (previously “2024 at the earliest”). 

New lending for Australian housing rose by 4.9% in May with a particularly large lift in investor lending in the month which was up 13%. Owner-occupier lending rose by 1.9% whilst lending to first home buyers continues to flatten out. New lending was strongest in NSW and VIC. 

New personal lending rose by a very strong 11% in May, which continues the recent trend higher. Commonwealth Bank’s internal data shows lending for cars and household goods are trending higher whilst lending for holidays remains very soft.
 
The number of Australian residential building approvals posted a large 7.1% fall in May, likely impacted by the ending of the government’s Homebuilder grant scheme. VIC and TAS actually posted increases. Approvals for renovations remain elevated, whilst non-residential building approvals have lifted in recent months.

Australian retail trade rose by 0.4% in May, which was an upgrade on the preliminary estimate. Retail trade continues to run at an elevated level with all major categories running above pre-Covid levels. Spending on food and eating out drove the increase in May. 
 
The US Labor Department’s employment report showed non-farm payrolls increased by 850,000 jobs last month, but the total remains 6.8 million below its peak in February 2020, as the federal government’s over-generous and over-extended Covid unemployment program pays people to stay home until September causing massive labour shortages. The better than expected monthly number comes as some Republican states have started to remove/decline the federal unemployment programs ahead of time thus forcing people back to work. 

European central bank policy makers have revamped their inflation target for the 1st time in almost 2 decades giving itself more room to keep monetary policy loose. The move gives the bank room to overshoot the target if needed, which means they can ply even more stimulus for much longer. 
A deal on an international corporate tax system of sorts came a step closer as 130 countries and jurisdictions backed a plan that includes a minimum corporate rate and tax-sharing on multinational firms’ profits. However, 3 European Union countries have resisted the plan given they currently have corporate tax rates less than the minimum being proposed. 

On the virus and vaccine front, the NSW lockdown was extended by a week impacting children’s first week back at school. The low percentage of people vaccinated seems to be the main focus of those in charge given their ill-guided elimination strategy, in contrast to the more critical areas of ICU bed availability (plenty) and deaths (very low relative to a normal winter flu season). In other parts of the world, concerns continued regarding the Delta variant, which data shows is more contagious, is significantly less deadly than the original strain, and vaccines are more than effective. The US continues to reopen, the UK is nearing the date when all restrictions will be removed, whilst Japan declared another state of emergency as it tries to ready itself for the Olympics. 

Chinese authorities are planning rules changes which would allow them to block companies from listing overseas, closing a two decade loophole which has allowed Chinese tech giants to attract foreign capital. The move continues Beijing’s tightening of controls over the country’s largest tech companies. 

Former US President Trump announced that he will sue Twitter, Facebook, and Alphabet as well as their CEOs in a class action lawsuit for blocking him out of their social media platforms. Trump is banned from Twitter for life and Facebook for at least 2 years, pending another review. The case will likely be decided by the US Supreme Court with both sides effectively using the same argument that it’s their 1st amendment right to not be censored (in Trump’s case) and to censor (in the social media company’s case given they’re private companies).  

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.