- A mixed equity market this week with US equities up strongly, Australian equities largely flat, whilst other global equity markets fell.
- In local stock news, the Seven Group has increased its offer for a bigger stake in Boral, with Seven now offering $7.30 a share for a 5% increase in their stake and $7.40 for a 10% increase. Their stake currently sits just below 30%. Boral’s board has told shareholders to reject the offer.
- IGA Supermarkets owner and distributor Metcash has reported record annual sales and will buy back shares. The sales momentum has continued in the first 8 weeks since their fiscal year end as consumers continued to spend heavily on food, liquor, and hardware.
- Genworth Mortgage Insurance fell sharply after revealing it could have a tough time renewing contracts with the Commonwealth Bank after the bank said it wouldn’t renew Genworth’s contract and instead would go to market.
- Telstra sold almost half of its mobile towers business, which owns 8,200 towers, for close to $3 billion to a consortium which includes the Future Fund, and retirement super fund’s Commonwealth Superannuation Corp and Sunsuper. About 50% of the proceeds are to be returned via a possible share buy-back.
- Energy provider AGL confirmed it will demerge its coal-fired power stations business and cleaner energy operations. AGL will become Accel Energy and try and redevelop the coal and gas-fired power stations for battery power. AGL Australia will offer consumers electricity, gas, internet and mobile services.
- Oil prices rose again this week as the oil cartel OPEC and its allies delayed preliminary talks for a day to create more time to find a compromise on oil output increases as oil prices continued to rise in light of rising demand, lack of supply, and waning investment.
- The Aussie dollar fell to its lowest level in more than 7 months as lockdowns and vaccine disagreement hit home whilst the US dollar rose in anticipation of potentially better than expected jobs numbers which may force the US central bank to raise rates earlier than planned.
- Total credit to the Australian private sector rose by 0.4% in May whilst annual growth edged higher to a still low 1.9%. Housing credit came in stronger than business and personal credit which both remain weak. Housing credit sits almost 5% higher than a year ago, firmly in favour of owner-occupiers over investors.
- Dwelling prices rose by 1.9% across the 8 capital cities combined in June, with Sydney and Hobart seeing the largest gains. Over the year, dwelling prices are up more than 12%. Detached houses rose by 2.2% in June whilst units rose by 1.2%.
- Australian job vacancies surged by more than 23% over the 3 months to May, driven by a huge lift in private sector vacancies with public sector vacancies also rising strongly too. The biggest rise in vacancies came from VIC, followed by QLD and NSW. On a sector basis, the biggest increases came from those sectors most adversely affected by lockdowns in 2020.
- The Australian trade surplus (exports minus imports) rose strongly in May from the previous month coming in at $9.7 billion, which was actually short of market estimates. The rise was driven by a 6.1% lift in exports and a 2.9% lift in imports, with exports strong across both rural and non-rural goods.
- The latest US personal consumption expenditures data (the US central bank’s preferred inflation measure) showed underlying inflation rose less than expected in May. Expectations were lofty. The data showed a 3.4% rise on the same time last year, which is above the central bank’s 2% target.
- US payrolls showed that the private sector added 692,000 jobs in June, coming in above expectations, whilst the market and economists eagerly await more jobs data due overnight.
- On the virus front, virus containment and vaccines started to unravel this week with the QLD Premier and chief health officer going at it alone, with the latter suggesting she wouldn’t recommend the young take the AstraZeneca vaccine. The shift came after a national cabinet meeting where it was supposedly agreed that they would open the AstraZeneca vaccine up to everyone and fully indemnify doctors (at the request of the Australian Medical Association) who chose to do so. It also got testy at a couple of state premier press conferences, notably QLD and SA, with journalists finally asking the right questions and not backing down. Australia’s medicines regulator gave provisional approval to the Moderna vaccine whilst data showing the delta variant of the virus to be more contagious but significantly less dangerous than the original strain. The 2 week snap Sydney lockdown is expected to cost businesses more than $750 million according to industry organisations, whilst new figures from Tourism Australia claim border closures have cost $80 billion since last year.
- US President Biden has reached a tentative bipartisan deal with senators for a US$579 billion infrastructure plan, which is significantly smaller than his original plan which included significant amounts of “social” infrastructure (not really infrastructure). The deal at least gets things moving on the infrastructure front.
- US President Biden ordered airstrikes on Iranian-backed groups in Syria and Iraq. Rather odd to be striking a nuclear deal with Iran whilst fighting Iranian-backed groups in the middle-east. Might it be that rising oil prices are starting to hit home in the USA.
- French regional elections, a precursor and good barometer for the upcoming federal elections, showed disappointing results for President Macron and far-right leader Marine le Pen. Nationwide, right-wing parties fared marginally better than their left counterparts.
- In a speech marking the Chinese Communist Party’s 100 year anniversary, President Xi called the country’s quest to gain control of Taiwan a “historic mission” and warned the country’s adversaries to avoid standing in the way of his government.
Chris Lioutas, Director, Insight Investment Consultants
Chris holds the position of asset consultant for Maxim Advisors and is a current sitting member of Maxim's investment committee.
With permission of the author, this article is presented by Maxim Private Clients Pty Ltd ASFL No. 511972
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