Friday, November 28, 2014

Australian Equities Market

THIS MORNING

In Australia, private sector credit figures and monthly banking statistics are released. In the US, there is only a half day of trade on equities markets.

OVERNIGHT MARKETS

US Equities

US sharemarkets were closed for Thanksgiving Day. At the end of trade on Wednesday the Dow Jones was up by 13 points or 0.1 per cent, the S&P 500 index was up by 0.3 per cent to record highs and the Nasdaq had gained 29 points or 0.6 per cent.

The US bond market was closed for Thanksgiving Day. On Wednesday, US 2 year yields were steady near 0.52 per cent while US 10 year yields fell by 2 points to 2.245 per cent. Over the week, US 2-year yields were unchanged while US 10-year yields fell by over 6 points.

Major currencies fell against the greenback in European and North American trade on Thursday. The euro fell from highs near US$1.252 to lows near $US1.2465, and was around $US1.247 in late North American trade. The Aussie dollar fell from highs near US86.1c to around US85.35c and was near US85.5c in late North American trade. And the Japanese yen weakened from ¥117.24 per US dollar to ¥117.87 and was near ¥117.73 in late US North American trade.

World oil prices slumped on Thursday after OPEC oil nations kept production quotas unchanged. In electronic trade Brent crude fell by $US4.93 or 6.3 per cent to $US72.87 a barrel while the US Nymex crude price fell by $US4.64 or 6.3 per cent to $US69.05 a barrel.

Base metal prices were lower by up to 0.7 per cent on the London Metal Exchange on Thursday with zinc leading the declines while nickel bucked the trend, up less than 0.1 per cent. Gold fell as the US dollar rose with Comex gold futures down by $US6.80 an ounce or 0.6 per cent to US$1,189.80 per ounce. Iron ore rose by $US1.70 to $US69.70 a tonne on Thursday.

YESTERDAY'S MARKET

Local Markets Update.

This news story is reprinted from www.businessspectator.com.au

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Treasury Backing For Tough Budget

OUTGOING Treasury secretary Martin Parkinson has ¬offered his strongest support yet for the Coalition’s budget, arguing that failure to slow the growth of welfare, health and education spending will undermine Australians’living standards and require damaging, unfair increases in income tax.

Dr Parkinson, due to step down as secretary within weeks, said cutting government spending was preferable to lifting taxes and hinted that the shrill opposition to government plans to reducing future welfare and pension payments was disproportionate.

“It is important to draw a distinction between reducing current transfers and reducing the future real growth in those transfers,” he said.

It was “inevitable” recipients of welfare payments would bear the brunt of efforts to reduce social spending.

Dr Parkinson said the budget faced at least 10 years of deficits and urged urgent reforms to the “1950s tax mix” and the dysfunctional federation to create the best conditions for future productivity and economic growth.

The implications for fiscal sustainability of failing to take action seem to have been lost in the public debate, as if this does not matter to Australia’s future prosperity,” he said.

“It’s not feasible to materially reduce spending growth without looking at the largest spending categories … this is health, welfare and higher education,” he added, pointedly referring to the three policy areas where the Senate has refused to broach change.

Workers on average incomes would soon be paying a marginal income tax rate of 39 per cent, he said, adding that bracket creep hit the lower paid the hardest.

Meanwhile official figures backed up Dr Parkinson’s disappointment with the sluggish pace of growth outside the resources sector, where momentum was “rapidly diminishing”.

Capital expenditure in the third quarter edged up slightly to $38.2 billion according to the latest ABS survey of firms’ investment intentions — defying most economists’ gloomier predictions. But total capital expenditure for this financial year is still projected to be $153bn, or 8 per cent lower than a year ago.

“Stepping back, while private ‘non-mining non-manufacturing’ investment intentions have improved, this remains insufficient to offset the sharp ¬slowdown in mining sector investment” said Phil O’Donaghoe, a senior economist at Deutsche Bank.

“We see little prospect of public investment filling the void, as fiscal consolidation efforts at both the federal and state level suggest little prospect of immediate strength in public investment activity.”

Dr Parkinson said unemployment was bound to rise further before falling but the bigger risk was that the cyclically unemployed would become struc¬turally, or permanently, unemployed.

This news story is reprinted from www.theaustralian.com.au

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GP Tax Confusion Highlights Split In Coalition

Divisions within federal Cabinet over budget policy versus political strategy have raised speculation of tensions between Prime Minister Tony Abbott and Treasurer Joe Hockey.

Sources said there was a view in the government that the two offices were not communicating effectively, amid differences over the degree to which the government should continue losing support for pursuing budget cuts it has no hope of securing.

It is believed Mr Abbott has favoured a more pragmatic approach by dropping some budget savings measures but has met resistance from the Treasurer, who is keen to stay the course to protect the budget repair task.

Asked if there was tension between the offices, one senior coalition MP agreed, before adding, "but there are tensions everywhere at present".

The MP said it was clear some people wanted to press the reset button after a horror budget politically but were asking how that could be done while Mr Hockey remained Treasurer.

Ministers and MPs were aghast on Thursday as the government first flagged binning its unpopular $7 GP-tax as a policy "barnacle", before re-committing to the proposal as if nothing had happened.

The confusion reached a climax when senior government ministers, Senate leader Eric Abetz, Health Minister Peter Dutton, and Mr Hockey, all weighed in to deny any change to the policy's status.

This was despite a welter of media reports arising from a series of separate background conversations that had taken place with the Prime Minister's office on Wednesday afternoon.

Mr Hockey told reporters the GP "price signal" initiative remained alive, even after several journalists at different media organisations had reported the policy was being benched Mr Hockey said the government still intended to take its co-payment to the Parliament, as Liberal senator Ian Macdonald threatened to cross the floor and vote against the fee if it was brought on for debate.

Later Mr Hockey told Sydney's 2GB the policy was not a liability to the government.

"Look, it is not a barnacle," he said. It is a policy that is about trying to fix some of the challenges associated with the mess that was left to us by the previous government and one of them was that Medicare has grown from $10 billion a year 10 years ago to $20 billion now a year and the Medicare levy only raises half of that."

The Treasurer's intervention as the most senior economic minister in the government appeared to have put him at odds with Mr Abbott, forcing the Prime Minister to fall into line.

However, it is not clear what the government intends to do regarding the plan, with one suggestion being that it would seek to bypass the Parliament to bring in the charge by regulation rather than through legislation.

That could involve restructuring the payment by reducing the Medicare rebate for bulk-billed patients by $5 on each rebate claimed.

The government was not saying, with ministers refusing to rule in or out any options.

There are three competing versions on the future of the co-payment now, ranging from benching it for political reasons, to modifying it and pursuing it through regulation to bypass the Senate, to attempting to pass it as set out in the May budget.

Speaking in Canberra on Thursday, Mr Hockey said the policy stood and the government would pursue it in the Parliament when it was able to do so.

Liberal Senator Ian Macdonald has threatened to cross the floor over the GP fee proposal if the government brings it before Parliament.

The Australian Medical Association has called on the government to make a clear statement on the whether it has shelved or is still pursuing a GP fee.

Earlier on Thursday, Senator Macdonald told Sky News he did not think a GP fee was the right way to go and he would vote against it.

"I think a price signal is important. I think the scheme that they introduced by surprise, I might say on budget night, is not the right way to go," he said.

This news story is reprinted from www.smh.com.au

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Thursday, November 27, 2014

Australian Equities Market

THIS MORNING

In Australia, data on new home sales and business investment are released. In the US, markets are closed for Thanksgiving Day.

OVERNIGHT MARKETS

US Equities

US sharemarkets again held in tight trading ranges on Wednesday as investors digested economic data and prepared for the Thanksgiving Day holiday. Shares in Hewlett Packard rose by 4 per cent after reporting fourth quarter results. At the close of trade, the Dow Jones was up by 13 points or 0.1 per cent after trading in a 40 point range. The S&P 500 index was up by 0.3 per cent to record highs and the Nasdaq gained 29 points or 0.6 per cent.

US long-term treasuries rose again on Wednesday (yields lower) with the barrage of new economic data on the softer side of market expectations. Treasury sold $US29 billion of seven-year notes also on Wednesday. US two-year yields fell by 1 point to 0.516 per cent while US 10-year yields fell by 3 points to 2.234 per cent.

Major currencies fell against the greenback in European trade but recouped losses in the US session on Wednesday. The Euro lifted from lows near $US1.2445 to highs near $US1.2530, and was around $US1.2510 in late US trade. The Aussie dollar fell from highs near US85.60c to around US84.80c but lifted to near US85.45c in late US trade. And the Japanese yen strengthened from 117.89 yen per US dollar to ¥117.43 and was near ¥117.73 in late US trade.

World oil prices eased on Wednesday as investors digested the barrage of economic data in the US and positioned ahead of the meeting by OPEC oil nations to set production quotas. Brent crude fell by US58c or 0.7 per cent to $US77.75 a barrel while the US Nymex crude price fell by US40c or 0.5 per cent to $US73.69 a barrel.

Base metal prices were higher by up to 0.5 per cent on the London Metal Exchange on Wednesday but nickel fell by 1.1 per cent and copper lost 0.3 per cent. Gold fell slightly with Comex gold futures down by US50c an ounce or less than 0.1 per cent to $US1,196.60 per ounce. Iron ore fell by US60c to $US68.00 a tonne on Wednesday.

YESTERDAY'S MARKET

Local Markets Update.

This news story is reprinted from www.businessspectator.com.au

Read more details on Australian Stock Market

Australian Dollar Rises On Business Investment Figures

AUSTRALIA’S recovery from a mining investment slowdown is on track as other sectors of the economy step in to fill the breach.

Business investment rose 0.2 per cent in the September quarter, official figures show, beating economists’ expectations of a 1.9 per cent fall.

The Australian dollar climbed a quarter of a US cent after the release of the figures. It was trading at US85.60 cents at 11.34pm (AEDT), up from US85.34c.

The rise suggests non-mining activity is strengthening, preparing to pick up where mining investment left off, ANZ senior economist Felicity Emmett said.

“I think it suggests the recovery in non-mining activity is really on track and we can continue to expect business investment in non-mining to pick up.”

A solid rise in plant and equipment investment is likely to lift expectations for economic growth in the September quarter, she said.

National Australia Bank senior economist Spiros Papadopoulos said the expectations for future investment show strength in non-mining sectors of the economy are starting offset the fall in mining investment.

“The other industries are coming through, that’s the third solid quarterly gain in a row,” he said.

“It’s a small positive sign that give us hope that we’ll start to see some better non-mining business investment coming though over next couple of years.”

NAB is forecasting economic growth of 0.7 per cent in the September quarter.

“We were forecasting a fall inbusiness investment so there might be some upside risk to that, but it was a small 0.2 per cent gain in business investment, so we’re unlikely to revise our forecasts based on that,” Mr Papadopoulos said.

Economic growth figures will be published next week.

The closely watched investment figures cover investment in capital goods which includes buildings and equipment.

During the 2014/15 financial year, businesses expect to invest $153.21 billion.

That’s 2.2 per cent higher than the previous estimate for 2014/15, but 7.5 per cent lower than an estimate at the same time last year for 2013/14.

Estimates are gathered in a series of seven quarterly surveys.

This news story is reprinted from www.theaustralian.com.au

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