- Local and global share prices rose this week on vaccine optimism.
- In local stock news, a fresh class action has been levelled against Crown Resorts, accusing it of misleading investors over possible anti-money laundering breaches. Pressure is piling on the company.
- The Australian banking regulator said it would from January 1 remove its requirement that banks and insurers retain at least half their earnings. That means dividends can start to rise again. In other bank news, the ANZ bank CEO said that 92% of Australian home loan customers allowed deferral had resumed repayments.
- a2 Milk shares were placed in a trading halt early Thursday morning as the company has become aware of information that may require them to revise their previously issued guidance. Speculation is that it is another downgrade to earnings.
- The Australian dollar pushed through US76c as the US dollar continued to fall on delays to fresh fiscal stimulus and likely further stimulus from the US central bank. Putting upward pressure on the Aussie is the skyrocketing iron ore price.
- The Australian Bureau of Statistics showed a further strengthening in employment with more than ¾ of payroll jobs lost earlier in the year regained by the end of November. Employment rose by a very strong 90,000 in November, following revised 180,400 increase in October. The unemployment rate fell to 6.8% even with the participation rate rising to its previous record high. The strength in November largely all came from full time jobs whilst hours worked rose by a strong 2.5%.
- Whilst US labour market data appears to be weakening, a key consumer sentiment survey improved more than expected in November while a gauge of inflation rose moderately.
- European leaders approved a much-needed $2.9 trillion budget and pandemic recovery package which paves the way for the start of a European recovery. A large proportion of the funding will find its way to those countries hardest hit economically by Covid, possibly helping to ease north-south European divisions. A big chunk of the money has also been earmarked for climate change initiatives.
- A key Euro area data point pointed to still contractionary conditions in the economy, but the reading came in well ahead of economist expectations, boosted by German manufacturing and French services. The data pushed the EURO to its highest level against the US dollar since 2018.
- PM Scott Morrison won’t be among the world leaders making a virtual address to the United Nations Climate Action Summit. The official line was that the PM wasn’t invited to speak because he hadn’t come up with an ambitious enough pledge to cut greenhouse gas emissions…….bah humbug. Another China bully tactic. Poor form from our allies who allowed it. Worth remembering that Australia is one of the world’s biggest suppliers of LNG, a “transition” energy source that will be in high demand as the world transitions to renewables over a much longer period than current over-ambitious targets.
- China has lifted restrictions on coal from all nations except Australia in the latest attack on our country’s exports. This would provide further grounds for a World Trade Organisation claim. It’s a clear attack from China considering a trade route proximity to them and the quality of our coal on the global stage. Countries like India, Japan, and South Korea will assist in taking some of our coal given increased demand, but they won’t be enough to match Chinese volumes. Apparently, China’s steel producers have called for a regulatory probe into skyrocketing iron ore prices, which sounds rather silly given they are responsible for the rising prices (in addition to lack of supply from Brazil).
- On the vaccine front, vaccines have continued to be rolled out across the UK and the US, with the US expecting to have 40 million doses available by the end of the month. Europe has yet to approve any vaccine. Australia’s supply, whilst high, needs to be re-evaluated following the failed University of Queensland vaccine (was never going to succeed) and higher efficacy for Pfizer and Moderna vaccines over AstraZeneca’s (which we’ve bought the most of). PM Morrison maintains that Australia hopes to distribute vaccines starting in March. Meanwhile, deaths in the US continue to rise whilst the Germans have gone into full lockdown (with the Brits and Dutch not far behind) and the South Koreans have warned of potential tighter restrictions.
- The next round of much needed US fiscal stimulus looks no closer to an agreement after Senate Majority Leader Mitch McConnell said Republican senators won’t support US$160 billion in state and local funds as part of the potential trade-off. It’s important to note that the US$160 billion is being earmarked for rebuild/repairs in Democrat states and cities that were damaged by violent protests. Republicans want to ensure that all stimulus goes to households and businesses, and that small business are protected from any Covid claims.
- A no-trade deal Brexit remains a possible outcome on December 31 after UK PM Boris Johnson’s appeal to European leaders fell on deaf ears. Hardly surprising given the Brits unrealistic expectations that they could divorce themselves from the EU and still retain the benefits that come from being part of the EU. Trade negotiations will continue right up until December 31 in the hope of a deal.
- Joe Biden is now officially the President-Elect of the USA after the state electors submitted enough votes to get him past the 270 required to become the President in January. Legal challenges remain. The only thing outstanding now is the US Senate, where control will be decided by the Georgia run-off on January 5 where 2 Senate seats are up for grabs. A Republican hold in one or both seats would see the Republicans hold the Senate, whilst a swing of both seats to the Democrats would see the Senate tied at 50-50 which would give the Vice President the tie-breaking vote when required.
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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