What we liked

  • Two of the busiest air routes are located in Australia. According to website OAG.com, they Melbourne to Sydney route is the second busiest route in the world with 54,519 flights a year just below the South Korean Jeju to Seoul route. The Melb-Syd route even beat the LA to San Francisco route. The Brisbane to Sydney route came in at 8th place. The Melb-Syd route could add to the argument that a high-speed rail network is needed to alleviate pressure from the two airports.
  • A Kodak moment. Shares of Eastman Kodak soared as much as 150% in US trade after the photography firm jumped on the cryptocurrency bandwagon. It announced the launch of a new blockchain platform called KODAKOne that uses KODAKCoins. KODAKOne will be an image rights management platform to help new photographers register new work and archive their existing work. They can licence this through Kodak’s platform. Basically the currency is a photo album currency. It allows photographers to receive payment for licencing their work immediately upon sale. The blockchain ledger records transactions. The initial coin offering (ICO) will open to investors on January 31.
  • The NBN Co has finally dropped the prices it charges wholesalers. Itreduced prices for its 50 Mbps to the price of its 25 Mbps speed plan in December in the hope that the big guys such as Telstra and Optus will pass on the savings to customers. These cuts will save the average punter on the NBN 50 plan $10 a month. Telstra, Optus and TPG Telecom quickly announced price cuts. But not everyone has passed on these savings.
  • Oil prices are soaring and have hit a high of US$70 a barrel for the first time since December 2014. The move came after OPEC said it would continue to limit supplies. The OPEC president Suhail al-Mazrouei said OPEC was committed to limiting output until the end of the year. Prices also rose due to a surprise fall in US oil stockpiles. US production fell by 290,000 barrels per day to 9.5 million. It is great news for oil stocks such as Oil Search (OSH), Santos (STO) and Woodside Petroleum (WPL).
  • Retail sales numbers have smashed expectations in November led by gains in household goods and other retailing industries. That gave way for a better than expected Christmas trade. Sales rose 1.2% to $26.4 billion well above analyst expectations for a 0.4% rise. The rise was led by the household goods (4.5%). The new Apple iPhone X is believed to have helped drive retail sales to five-year high. The following industries helped boost November’s sales figures:
    • Electrical and electronic goods turnover (9.3%) seasonally adjusted.
    •  Food retailing (0.2%)
    • Cafes, restaurants and takeaway food services (0.4%)
    • Department stores (0.4%)
    • Clothing, footwear and personal accessory retailing (0.2.%).
    • The worst sectors were Household department stores (-1.1%)
    • Household goods retailing (-0.3%)
    • Other retailing (-0.2%).
    • Online sales added 5.5% to total retail sales the largest monthly contribution in the history of the online sales. The positive number helped retail stocks such as JB Hi-Fi (JBH), which rose by 6% on the day.

Retail sales chart from Business Insider

 

What we didn’t like 

  • Italy heads to the polls on 4 March. The country is facing political uncertainty. A strong centre-right coalition is pitted against populists and a divided left. Former Italian prime minister Silvio Berlusconi and his bunga-bunga party is back, representing the Forza Italia party (centre-right coalition) despite being banned over tax fraud. The result is expected to produce a hung parliament. A negative result like this will spook markets. A coalition between Italy’s main left- and right-wing parties cannot be ruled out if no clear winner emerges. If the Five Star Movement (M5S) gain power, populism will rule. There is a high level of uncertainty and as we’ve seen in the past anything can happen. Financial markets are becoming more and more nervous. A region poll has the M5S party is in the lead.

  • Citigroup’s chief economists has rung the bell and has issued a warning of an impending share market correction. He said “there are clearly signs of late-cycle froth in financial markets, in everything from equities to corporate credit and real estate, especially in the US. There is the risk of an overdue correction.” The economist believes now is the time to be vigilant and considerable caution is warranted. Downside risks are building.
  • The idea of investing in Bitcoin ETFs have hit a bump. The two US companies, Rafferty Asset Management LLC and Exchange Traded Concepts LLC, that were to launch the ETFs have ditched their plans due to ongoing concerns by the Securities and Exchange Commission. There were concerns surrounding liquidity and valuation of futures contracts based on the digital asset. The market was confident the proposal would get the green light after both CME and CBOE launched futures contracts.
  • Australia’s housing market is set to fall this year with Morgan Stanley saying prices and building activity are set to take a dive. The MSHAUS index which takes into account a range of factors that influence housing market activity and prices came in at negative territory in the third quarter of 2017, leading the index to a record low of -1. That means the house prices falls we saw in Sydney late last year are likely to continue. The model is designed to lead activity by three quarters.
  • An article on allhomes.com.au talks about an expensive banking trap that is catching out young people and costing them thousands in wasted money. Being loyal to the first bank opened or being loyal to a parent’s bank is costing young homeowners. A new research report shows that one in five mortgage holders that has a loan with their childhood bank pays an average of 20bps higher than others. That’s roughly $1272 per year extra in interest for a medium priced house in Sydney or $1188 in Melbourne. So it pays to double check and compare bank interest rates before signing up blindly.

Market Indicators