[table “218” not found /]
Jobs in the US came in at 156,000, which was under the 175,000 tipped by economists but virtually no one was betting against the expected December interest rate rise, even though unemployment did sneak up from 4.9% to 5%. Wall Street was a little negative but that’s more likely linked to rate expectations and lower oil price, after the Russians hinted that they might not stick to the OPEC deal, which was set to be confirmed in November. Is anyone surprised that Russian oilers would be double-crossing SOB’s?
And on this subject, the Brexiters copped it this week, with the pound treated like a real bounder (to use UK terminology), after national leaders dared to open their mouths and forex-players didn’t like what they heard.
Following comments from the new Pom PM Theresa May, on the exit plans for March next year, and then a retort from the French PM, Francois Hollande, who said Britain has to “suffer for the Brexit vote” to make sure no other EU member gets independence ideas, the pound endured a flash crash, losing 6% in what looked like a matter of moments. It did recover but still ended down 1.6% but to keep the whole Brexit payback from international markets, the pound is down 13% against the greenback since June 23, when the Brits decided to ditch their EU membership.
A bit of this pound punishment also reflects that some forex punters were gambling on a ‘wishy washy’ or soft Brexit – even none. But reality started biting on Friday in Asian trading and so a Christmas trip to the Old Dart looks like it’s getting cheaper by the day.
That all said, UK stocks have liked the new Brexit-world. Bloomberg sums it up this way: “The benchmark FTSE 100 Index surged as much as 18 percent from the low in the aftermath of the referendum, boosted by a slumping pound and economic data that have been beating forecasts, while gilt yields fell to a record in August.”
And this is why Monsieur Hollande has gone in hard to make sure other countries in the EU don’t think: “We’d like a bit of that Brexit-style bounce for our economy.” Exit negotiations will be hard ball for our UK mates and there could be some big capital outflows that could hurt future growth rates, which is reflected in the pound’s pounding.
Back home, oil price spikes helped stocks, while gold’s slump didn’t help the market index. The S&P/ASX 200 was up 0.6% for the week to 5467.4 points, despite the RBA giving out vibes that it would prefer not to cut interest rates. Maybe even the honkies, who are short-term speculators, have stopped getting too excited about rate cuts that have increasingly less economic value!
What I liked
- In the US, the ISM service sector PMI lifted from 51.4 to 57.1 in September – an 11-month high.
- Meanwhile, the ISM manufacturing index rose from 49.4 to 51.5 in September (forecast 50.3). So both ISM readings say the US economy is on the rise.
- Locally, retail sales were up, rising by 0.4% in August, after lifting by 0.1% in July. Retail trade is up 2.8% over the year.
- New motor vehicle sales totaled 102,696 in September, up 1.3% on a year ago. A record 1,179,652 new vehicles were sold over the year to September.
- The CoreLogic Home Value Index of capital city home prices rose by 1% in September to stand 7.1% higher over the year. Prices rose in all capital cities except Perth and Darwin. But regional prices were only up 1.4% in the year to August.
- Oil was above $US50 a barrel during the week, which helped energy stocks. Beach Energy rose 9.2% and Santos was up 8% for the week.
- BHP Billiton’s oil exposure explained why it spiked 4.1% for the week but Rio’s rise of 0.8% shows resource stocks are still (and probably will remain) in favour.
- The Bank Inquiry from the ‘grill team’ in Canberra didn’t hurt bank share prices, with the big four up around 1% to 3% for the week.
- Top 20 stocks are becoming in favour again, with even Woolies back in the good books, as this five-day chart shows:
- The IMF expects the global economy to grow 3.1% this year and 3.4% in 2017, which says improvement ahead but I’d be even happier if I believed in the group’s forecasting quality!
- The number of inbound travellers totaled 1.833 million in July, up 11.1% over the year.
What I didn’t like
- Our China trade surplus balance stood at a 5-month low of $13.3 billion in August and it remains well down from the record high of $42.8 billion set in April 2014.
- The Performance of Services index lifted by 3.9 points to 48.9 points in September – marking the second consecutive month of contraction but it is improving.
- The ANZ/Roy Morgan consumer confidence rating fell by 2.2% to 117.9 in the week to October 2 but happily, confidence is up 7.2% over the year and well above the average of 112.4 since 2014.
- Dwelling approvals fell by 1.8% in August, after rising by a huge 12% in July. In trend terms, approvals rose by 0.6% in August.
- Job ads fell from four-year highs, down by 0.3% in September but note these numbers were at four-year highs. Job ads are up 3.7% on a year ago.
What I’m looking forward to
There’s heaps of economic data here next week from consumer to business confidence building stats, etc. while overseas, there’s US and China stats that will keep us speculating on the Yank economy, while the third quarter reporting season kicks off. This could be the new info Wall Street needs to get out of the current range.
This three-month chart of the Dow shows there hasn’t been much action for three months:
Earnings could change all that!
Top stocks – how they fared
[table “217” not found /]The week in review
- This week, Tony Featherstone [1] named five potential stock winners and losers if Trump gets the top job.
- Charlie Aitken shared a contrarian investment idea that you can see with your own eyes – APN Outdoor Group (APO) [2].
- James Dunn [3] explained why these mining services stocks look the goods for FY17 and FY18: GR Engineering Services (GNG), MACA (MLD), RCR Tomlinson (RCR) and Lycopodium (LYL).
- Barrie Dunstan [4] said you should look at how super changes were received in the past if you’re interested in where your investments are headed.
- Tony Negline explained everything you need to know about the $1.6m pension cap [5].
- The brokers [6] placed Medibank Private and nib in the good books.
- In our second broker report [7], Sims Metal Management was upgraded while Nine Entertainment copped a downgrade.
What moved the market?
- Increased expectations for the US Fed to raise rates.
- Higher oil prices. A fall in oil inventories, concerns of supply disruption from Hurricane Matthew, and hopes OPEC will cut output helped drive prices higher.
- Nervousness about the ECB tapering its bond-buying program.
Calls of the week
- The RBA kept the cash rate unchanged at 1.50%. AMP Capital’s Shane Oliver thinks they’ll cut in November, but admits it’s a close call.
- In his parliamentary grilling, ANZ chief Shayne Elliot said he’d “lead” the way for the banking industry in offering cheaper credit card interest rates.
- And in case you missed it, Tony Featherstone named the sectors and stocks set to benefit (or get booted) by a Trump Presidency [1].
The week ahead
Australia
- Monday October 10 – Overseas arrivals (August)
- Tuesday October 11 – Housing finance (August)
- Tuesday October 11 – Weekly consumer confidence
- Tuesday October 11 – NAB business survey (September)
- Wednesday October 12 – Credit and debit card lending (August)
- Wednesday October 12 – Building activity (June quarter)
- Wednesday October 12 – Monthly consumer confidence
- Friday October 14 – Lending finance (August)
- Friday October 14 – Financial Stability Review
Overseas
- Tuesday October 11 – US NFIB business optimism (September)
- Wednesday October 12 – US JOLTS job openings (August)
- Thursday October 13 – China Trade (September)
- Thursday October 13 – US Import and export prices (September)
- Thursday October 13 – US Federal Budget (September)
- Friday October 14 – China Inflation (September)
- Friday October 14 – Speech by US Federal Reserve Chair
- Friday October 14 – US Producer prices (September)
- Friday October 14 – US Retail sales (September)
Food for thought
Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.
– Thomas A. Edison, US inventor
Last week’s TV roundup
- St Wong [8] of Prime Value shares his thoughts on the market and the stocks he likes right now.
- REITs have been under pressure while equities have gone up, so should we be cautious [9] about them? To discuss this and more, Pat Barrett from UBS joins the show.
- Small caps have outperformed the top 20 stocks over the past 12 months. To discuss why this is the case and identify opportunities, Paul Rickard speaks with Michelle Lopez [10] from Aberdeen Asset Management.
- And to explain how global markets have impacted local stocks, and what to expect for the rest of the year, Raymond Chan [11] of Morgans joins Super TV.
Stocks shorted
ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.
This week, one of the biggest movers was Cover-More Group with its short position increasing by 1.34 percentage points to 10.87%. WorleyParsons went the other way – its short position decreased by 7.39 percentage points to 7.52%.
Charts of the week
Now trending: new $5 notes
Have you got your hands on the new $5 note yet? Well you’re not the only one, because in September, the value of $5 notes in circulation spiked by $152m during the month, or 17.7%!
Consumer sentiment is solid!
Consumer sentiment is on the up and above the 100-point average since 1980. The chart shows the ANZ-Roy Morgan and Westpac-Melbourne Institute consumer sentiment measure of perceptions of personal wealth, compared to the previous year.
Top five most clicked stories
- Tony Featherstone: Five stock winners and losers if Trump becomes president [1]
- Charlie Aitken: APN Outdoor Group (APO): A contrarian investment idea [2]
- Staff Reporter: Buy, Sell, Hold – what the brokers say [7]
- Barrie Dunstan: SMSF investors should learn from history [4]
- Tony Negline: How the $1.6 million cap works [5]
Recent Switzer Super Reports
- Thursday 6 October 2016: Trump vs. Clinton [12]
- Thursday 29 September 2016: Be patient [13]
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.