- Equity markets were mixed this week with developed markets flat to slightly lower on virus concerns whilst emerging markets moved higher assisted by Chinese policy support.
- A big jump in quarterly earnings is expected to mark a peak for US profit growth in the recovery from last year’s earnings collapse. Upcoming quarterly results will be key, with analysts now expecting 66% of companies to beat guidance.
- In local stock news, Sydney Airport’s board has rejected the $8.25 per share bid from a consortium of super funds citing that the offer undervalues the business, whilst Spark Infrastructure declined an offer for all its securities from a consortium of pension funds offering $2.80 per security. Pension funds cashed up, with cash burning a hole in their pockets.
- Wesfarmers made a $687 million bid for Australian Pharmaceutical Industries, the distributor of medicines and healthcare products and the owner of Priceline pharmacies, which will form the basis of a new healthcare division.
- Shareholders of waste management provider Bingo Industries voted for a Macquarie takeover, whilst Seven Group continues buying shares in takeover target Boral, heading towards the 50% mark.
- Buy-now-pay-later stocks fell sharply during the week after a report indicated that Apple plans to allow users to repay Apply Pay purchases in instalments.
- Oil prices fell this week on concerns regarding rising virus cases globally, which also resulted in defensive assets like gold and government bonds performing well.
- HSBC’s chief economist for Australia and NZ said with NSW accounting for 32% of the nation’s total economic output, an extended lockdown was likely to take a significant economic toll on Australia’s recovery from the virus. NSW Treasury estimates that each week of lockdown takes $850 million off activity.
- Australian employment rose by 29,100 in June following a 115,200 increase in May, with the unemployment rate moving down to 4.9%, its lowest level in a decade. However, recent lockdown measures will hurt those numbers in the period ahead.
- New Zealand’s central bank surprised most investors with a plan to scrap its bond buying program (money printing) from next week. The result will likely be a soaring NZ dollar. Not good for an export-led economy.
- US central bank chair Jerome Powell said it was still too soon to scale back the bank’s aggressive support for the US economy while acknowledging that inflation has risen faster than expected but portrayed a recent jump in inflation as temporary and focused on the need for continued job growth.
- Data indicated that US consumer prices rose by the most in 13 years last month, while core consumer prices surged 4.5% on the same time last year, the largest rise since November 1991. The bond market noticed briefly, before turning attention to rising virus cases.
- European central bank president Christine Lagarde has signalled that new guidance on monetary stimulus will be provided shortly and that fresh measures might be brought in next year to support the Euro-area economy after the current emergency bond program ends.
- China’s central bank cut the amount of cash most banks must hold in reserve in order to boost lending in the economy as growth starts to wane.
- China’s exports unexpectedly surged in June, helping to underpin the economy amid signs the recovery is starting to slow.
- In a sign that US-China relations won’t be fixed any time soon, the Biden administration will add more Chinese entities to its economic blacklist over alleged human rights abuses whilst the US Senate passed a bill that would ban all goods from China’s Xinjiang region unless importers can prove they weren’t made with forced labour. US relations with Iran don’t look any better with the likely realisation that 2015 Iranian nuclear accord may be beyond saving, with no progress after multiple rounds of talks.
- On the virus front, the pace of reopening remains very mixed around the world whilst virus cases are rising in many countries. Most US states continue to reopen whilst California has just introduced some restrictions. The UK is proceeding with full reopening whilst cases continue to rise amongst a population with high vaccination rates. The rest of Europe remains mixed, particularly between the north and south, whilst cases continue to rise in South-East Asia. Closer to home, all states have seen varying degrees of increases to restrictions, with NSW’s lockdown extension and VIC entering a “snap” 5-day lockdown.
- In a sign that the people have had enough, we saw uprisings and street protests all around the world this week. Cubans have had enough of communism, South Africans weren’t happy with the jailing of former leader Zuma, whilst we saw protests in France, Greece, and here in Melbourne against government-imposed lockdowns and vaccine passports.
- Finance ministers from the US and Europe expressed confidence that a global tax deal endorsed by the Group of 20 has enough momentum to overcome domestic political obstacles in time for it to be finalised in October.
- Democrats on the US senate budget committee agreed to set a US$3.5 trillion spending level for a bill to carry most of President Biden’s economic agenda into law without Republican support. The bill would require the support of all 50 Democrats. This is in addition to the US$579 billion bipartisan infrastructure plan.
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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