Equity markets continue to grind higher helped by solid economic growth data in the United States, Europe and Japan as well as confirmation that the European Central Bank will halve the size of its monthly bond purchase program in January. Rising US rates across the yield spectrum have been a key driver of the overall US Dollar uptrend in recently. Alongside, lower Australian interest rates at the shorter end of the yield curve following the soft September quarter CPI data, has left the local money market less sure about a first RBA tightening as early as Q3 2018. This has compounded the negative impact of rate moves on the Australian dollar to US dollar exchange rate.
The weakening AUD has provided a tail wind to the ASX listed ‘offshore earners’ like ResMed Inc. and Boral Limited. I’m cautious of the strong rally and would look for weakness, but the medium to long term thematic remains favourable. ResMed Inc. had a solid result with revenue ahead of consensus, and earnings in line with expectations. All product categories saw strong sales growth, particularly masks, up 14 per cent following the resolution of manufacturing issues. Gross margins were up, from better product mix, manufacturing and procurement efficiencies, the prior year Astral field safety notification expenses, partially offset by declines in average selling prices. They also advised that the share buyback will recommence. This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser.