Good morning and welcome to your week. Here’s what’s happened so far:
1. US stocks had their best week for the year, but locally though, the rally on the ASX also continued with Futures suggesting another positive open this morning. On Friday night, December SPI futures rose 18 points to 5,419. Iron ore was higher Friday, as was Newcastle coal, which may help stocks today.
2. The Nikkei caught the US updraft and was up 5.23% last week. But the Hang Seng lagged with a more European performance and the Shanghai exchange fell 1.67% last week with relentless selling from the high of the week on Tuesday. The data didn’t seem that bad out of China but perhaps traders disagree. On Friday, the Nikkei was 1% higher at 15,292 while the Hang Seng and Shanghai exchanges were down 0.13% and 0.02%. All other things equal, Asia, with no major local data of note, should do better in trade today.
3. The Aussie dollar rallied a little into week’s end, resisting what seemed like a growing sense in the market that it was going to make a new 2014 low last week. Forex traders decided that they were tired of trying to thump it lower and it’s at 0.8804 this morning after trading below 0.8730 on Friday. A note from Westpac’s head of research Rob Rennie shows that while longer term “fair value” might be lower, the reality is that this is a market environment where the hunt for yield is inexhaustible and Aussie dollar assets are still high yielders.
4. It’s another big week of releases, most of which would look good for another big week for stocks. Except the big one – the possible end of QE in the US – could bring it all to a screaming halt. Or maybe not. Here’s Westpac’s excellent diary of all the data and events that matter in our region this week and here’s the US version.
5. Tony Abbott’s talking about “reforming Federation”. He spoke at the Sir Henry Parkes Commemorative Dinner on Saturday, and opened with a passionate primer on the differences in governing Australian pre- and post-Federation. It’s different now because we have a national government, Abbott said, but it’s just as bedeviled because “it’s hard to know who’s in charge”. Eventually, his talk turned to how to rationalise government and streamline how the cash is distributed:
The Commonwealth would be ready to work with states on a range of tax reforms that could permanently improve the states’ tax base – including changes to the indirect tax base with compensating reductions in income tax.
6. The Google shakeup. In case you missed it over the weekend, there’s been an epic management shakeup at Google. CEO Larry Page is taking a step back to focus on the “bigger picture” and Sundar Pichai takes over as head of all of Google’s core products. He’ll now run research, search, maps, Google+, commerce and ads, and infrastructure, in addition to Android, Chrome, and Google Apps. It’s basically everything except YouTube and some special projects. It’s the latest promotion in Pichai’s stellar decade-long career at Google, where one colleague notes he has led difficult projects and managed to avoid making enemies along the way. It’s a big move for the company – and will doubtless put some focus from investors on what Page will deliver in is changed role.
7. Aussie companies are looking to expand. The latest survey data from EY, its six-monthly Australasia Capital Confidence Barometer, shows the number of companies intending to pursue an acquisition in the next 12 months has more than doubled from 32% six months ago to 66% now. At the same time, corporate confidence in the quality and number of acquisition opportunities is at a four-year high. of the key findings, 96% believe the economy is improving or stable, up from 80% a year ago and 90% are confident in corporate earnings, compared to 46% a year ago.
8. The world’s oldest bank is in trouble. Italy’s Monte dei Paschi di Siena faces a 2.1 billion euro ($3.02 billion) funding shortfall that could force it to seek a merger, after a European banking review revealed serious weak points in the Italian financial system. In all, nine Italian banks failed the stress test which were designed to prepare the continent’s banks for unexpected systemic shocks. 130 banks were reviewed, 25 showed a capital shortfall and 13 were found to not have enough cash to weather a financial crisis.
9. Still no Ebola in Australia. A Brisbane teenager was isolated yesterday with a fever at the Royal Brisbane and Women’s Hospital after returning from West Africa. She was given the all-clear this morning, although doctors say it just the initial test and she remains isolated. And just to reiterate, Queensland’s chief medical officer told us all:
While Ebola is a very serious disease, it is not highly contagious as it cannot be caught through coughing or sneezing.
The risk of infection is extremely low unless there has been direct exposure to the bodily fluids of an infected person or animal, alive or dead.
10. Australia thrashed by Pakistan. Our men were spun out for a 221-run defeat in… Dubai. There’s a lot of talk of “humiliation” and “embarrassing” and “horror”, but that’s ridiculously over the top. It’s a Test, yes, but one that amounts to little more than an exhibition match on a low, slow wicket with no one watching. Mitchell Johnson failed to fire on a dust bowl? Not news. Australia historically plays poorly on such pitches and no one seriously wants to ditch Darren Lehmann’s inspired loyalty policy for a return to Cricket Australia’s horses for courses algorithms. Do they?
BONUS ITEM: The Wallabies are on tour in England under the new and sudden leadership of Michael Cheika. Kurtley Beale won’t be joining them, but his career is still alive. It’s your bonus item because Australian rugby is such a basket case these days that anything good coming out of it is, well, a bonus.
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