Market Indicators                               

What we liked

  • Sydney & Melbourne auction clearance rates have jumped again, but this time because of first home buyers entering the market due to stamp duty savings. In Melbourne’s north the auction clearance rate hit 91.7%. At one property a house sold with four first home buyers bidding for the sale. Whilst a booming property market that refuses to back down is probably not what we like, the fact that first home buyers have returned is a big positive.
  • Whilst the latest US jobs report came in better than expected it won’t be enough to push the US Federal Reserve to moving rates higher. Inflation remains low at 1.6%, under the Fed’s 2% target. By raising rates it will only push inflation lower. But if inflation hits 0.2% this week, that could be enough to tempt the Fed to go ahead and raise.
  • Iron ore continues to march higher extending its rally after China said they would cap steel output from November to March. This helped push steel futures higher and the spot iron ore price ticked up to settle around US$76.17 a tonne. It’s good news for iron ore miners such as RIO, BHP and FMG.
  • A UBS report says we could be seeing pilotless aircraft within a decade which could help shave billions off airline costs by getting rid of costly pilots and cutting ticket prices for passengers. UBS believes it could save roughly US$35bn a year in savings. Not only will the move save money but it will also make aircraft safer by having them controlled by computers which are less prone to make errors.
  • Space cadet super funds such as the Atlassian backed Spaceship fund are being targeted for better regulation due to concerns over their heavy use of outsourcing. Under the SIS Act super funds are allowed to outsource the functions of the trustee. The worry arises when the promoters of the product are not the trustee of the fund.
  • The diggers and dealers annual summit has kicked off in Kalgoorlie. One thing that has come out it so far is the ‘digital mine’. A digital mine is a mine that is completely digital. That means autonomous trucks, trains and drones are used for mining instead of people. Israeli company Airobotics is working with South32 to trial its drone at the Worsley Alumina project. The drones attempt to remove tedious or dangerous tasks that otherwise would have been done by a human. This will increase the demand for IT and robotics people rise at mine sites.
  • Facebook has just upped the ante. It will soon launch Watch which is a dedicated home for videos on its social network. That means it will take on the likes of YouTube and Netflix. The Watch function will allow users to view longer stretches of video such as TV shows and programs. It is a move to offer high quality videos that appeal to TV advertisers. It will also feature live programming.
  • After a rocky few months, Bitcoin is back. A recent rally has pushed its price back to US$3525 which is a new all-time high. The latest rise was driven by the rise and fall of bitcoin cash which was the creation of a second crypto-currency which ran updated software. Everyone dumped bitcoin cash in favour of bitcoin.

What we didn’t like

  • CBA was all over the headlines again this week and for all the wrong reasons. The bank is being accused of breaching money laundering and terrorism financing laws. There are some 53,000 breaches that are believed to have occurred which could draw a maximum penalty of $18m each. Following these explosive claims, a bank royal commission is all but inevitable. CBA shares have been sold off since the announcement. At the moment it’s too early to tell what the impact will be however investor sentiment has already been dented.
  • Donald Trump issued a stern ultimatum for North Korea to back off or they will “face fire and fury like the world has never seen.” North Korea retaliated by threatening a missile strike on a US Pacific territory, Guam, which is frighteningly close to Australia. US Intelligence assessed the situation and are certain North Korea has produced a miniaturised nuclear warhead. The reason for its production of a nuclear war head is to prevent the US from overthrowing its Kim Jong Un regime. With the realisation that there could be a real missile strike on Guam or anywhere for that matter, the pressure is now on the US to nip this in the bud before it becomes a real crisis.
  • Consumer confidence is waning with pessimists outnumbering optimists for the ninth consecutive month. The Westpac Consumer Sentiment Index fell by 1.2% from 96.6 to 95.5. The drop came from lower wage growth, higher electricity costs and concerns about rising rates. There were some positives such as lower petrol and the higher dollar but it wasn’t enough to lift confidence.
  • According to the latest Building in Australia forecast from BIS Oxford Economics, as the economy moves into 2018 and beyond, high rise apartments will start to come off. It is forecasting a 31% fall in the number of dwelling starts that will decline from a peak above 230,000 to a trough around 160,000 within three years. High-rise apartments are predicted to drop by 50% nationally, with falls in new building of up to 70% in Brisbane and 60% in Melbourne.