Global equities remained fragile over the past week with most markets trading slightly higher, although Asian and emerging market equities remained in negative territory. US equities rallied late in the week as reporting season continued to deliver positive news to the market.
Notably Facebook (FB) waved off concerns raised last quarter with revenue in line with consensus and profit beating estimates, after privacy concerns impacted their business. Samsung (SMSN) beat quarterly analyst estimates on growth in its memory chip business however signalled caution in semiconductors after announcing a cut in capital expenditure for the year.
Bond markets saw yields flat to slightly lower in the major markets. This is due to lingering risk aversion and softer-than-expected economic data in China and Europe, which also impacted the Chinese Yuan, Euro and Pound relative to the US Dollar.
Domestically the S&P/ASX 200 rose as quarterly reporting and annual general meetings consumed market news. Notably, shares in ASX-listed travel agency Corporate Travel (CTD) fell more than 20 per cent after the company was the subject of a research report by short seller, VGI, which listed 20 concerning red flags.
CTD went into a trading halt and before returning to trading, CTD Management released a report playing down the claims, which was unable to support their share price as the week progressed. Australia’s goods and services trade surplus for September rose to $3.02 billion, sending the AUD higher above $0.72.
The inflation report for the September quarter showed that CPI inflation softened over the quarter, as widely expected.
While headline CPI growth was in line with market consensus, at 0.4pc for the quarter, core inflation fell to 1.8pc year-on-year, still below the RBA’s 2-3pc target range.
For the RBA, which was already expecting a softer third quarter reading, this print confirms their outlook and is unlikely to shift the dial on monetary policy too much as we have previously highlighted.
There are likely to be continuing headwinds to core inflation from dwelling construction prices and rents – although rising fuel and energy prices, a lower Australian Dollar and higher food prices may provide some offset.
...although rising fuel and energy prices, a lower Australian Dollar and higher food prices may provide some offset.
ANZ and NAB came to the market with their full year results. ANZ maintained their dividend reporting cash NPAT result of $6.4b, which was above consensus, however still down 5pc on the prior year and down 14pc half on half.
Commentary from Shane Elliot provided that ANZ expect to face a tough revenue growth environment moving forward in their domestic retail banking for the foreseeable future. We share this view for the banking sector in general. NAB reported a cash NPAT of $5.7b slightly below consensus expectations.
This was down 14pc on the prior year however up 7pc half on half. The fall is attributed to restructuring and customer remediation costs, if the restructuring costs are excluded the cash NPAT would only be down 2pc on the prior year and 3pc half on half. In summary no real suprises emerged from these results and we foresee the banking industry facing headwinds over the next 12 months at least.
- 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. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited is owned by National Australia Bank Limited.
