Equity markets higher on US infrastructure plans

Blog
Thursday 1st April 2021

Equity markets higher on US infrastructure plans

Blog
Thursday 1st April 2021
Written by Chris Lioutas

Markets:

  • In a shortened week, equity markets were mostly higher buoyed by US President Biden’s US$2 trillion infrastructure plan.
  • In local stock news, the CEO of AMP has resigned after AMP denied reports last week he was leaving. He has been replaced by Alexis George who has previously managed ANZ Bank’s wealth divisions. AMP also announced that a potential sale of part of its private markets business has fallen through.
  • TPG Telecom’s founder David Teoh has surprisingly resigned, having steered a merger between the company and Vodafone Australia last year. He resigned as chairman and director whilst his son also resigned from the board. 
  • Telstra has revealed it will re-organise the company into 4 subsidiaries as it makes moves to better monetise its assets. The 4 divisions will include its fixed line business (physical infrastructure assets), towers (physical mobile towers), service (phone-related services), and international (overseas operations and sub-sea cables).
  • REA Group (realestate.com) has offered to buy brokers Mortgage Choice for $244 million which the Mortgage Choice board has recommended to shareholders. Mortgage Choice has a $54 billion loan book. REA pushing further into becoming a one-stop-shop solution in residential property market.
  • Tabcorp said it would review ownership options after recent offers for its wagering and media business were too low, at around $3 billion. Options included selling the wagering and media business, as well as a demerger.
  • The oil price fell this week as supply fears waned with the release of the tanker blocking Suez Canal whilst the gold price fell on higher bond yields and a slightly strong US dollar, which put downward pressure on the Aussie dollar.

Economics:

  • A report from the Property Council of Australia says that just 35% of Melbourne CBD offices, and 50% of Sydney CBD offices, were occupied in March. The report claims that remote working may be more than a passing trend. Time will tell.
  • Total credit to the Australian private sector rose by a weak 0.2% in February whilst annual growth fell to 1.6%. Housing credit was up 0.4% and is now 3.8% higher on the same time last year. Business credit was flat for the month whilst personal credit fell.
  • Australian building approvals surged by almost 22% in February after a fall of 19% in January. There were gains in both private houses and apartments in the month as well as alterations and deletions. Non-residential approvals reversed some weakness in the last few months with a lift of 27.5%, but still remains lower by 8% over the past year.
  • The US central bank raised its economic growth estimate for 2021 to 6.5% from 4.2% whilst many economists expect still faster growth.
  • US consumer spending fell by the most in 10 months in February, not helped by a cold snap and the boost from the 2nd round of stimulus cheques fading.
  • US private employers boosted hiring in March as more Americans got vaccinated against Covid-19. The report was in line with the recent signs of improvement in the labour market.
  • The European central bank president said that investors can test the bank as much as they want but policy makers won’t shy away from using all their powers to stop bond yields rising. The latest Euro area inflation data showed that prices rose 1.3% in March from a year earlier, remaining below the central bank’s target level.

Politics:

  • The political hotbed of vaccines continues with the European Union (EU) demanding that AstraZeneca meet its commitments for supplying vaccines to the EU before it will be allowed to export does anywhere else. Figures show that the EU has exported more vaccine shots since December than it has administered. The Germans went on the offensive signalling that they may declare France a “high incidence” virus area (given the French reluctance to vaccinate historically), which would trigger a negative Covid-19 test requirement for anyone entering Germany. Covid-19 “passports” are also still on the agenda, though Republican-led US states are likely to legislate against that.
  • The massive container ship finally became “unstuck” in the Suez Canal after causing significant delays to global supply chains and forcing some carriers and vessels to consider the epic voyage around Africa. Rumour has it that the blockage is curbing shipments of Robusta coffee (isn’t very good anyway) which is the type used to make Nescafe pods. Coffee drinkers beware.
  • China announced retaliatory sanctions on 9 British individuals and 4 entities for apparently spreading lies and disinformation about its Xinjiang region. China has also finalised a plan to confirm its control over elections in Hong Kong with a national security committee approving candidates for elections with directly elected seats cut from 35 to 20.
  • US President Biden announced the details of his US$2.6 trillion infrastructure bill which he says will allow America to beat China economically and move to green energy. The problem is he’s going to lift personal and corporate taxes to pay for it…..giveth and taketh away. The plan is a 2-part plan with the first part consisting of substantial investments in transportation, broadband, and care workers.

Author 

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

Maxim Private Clients Pty Ltd ABN 47 611 614 398 AFSL No. 511972

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