Kieran Salsone

Company profits come in below expectations for Sept quarter

Australia:  

Company profits rose by 1.0% in the September quarter, missing our own and consensus forecasts for an increase of 3.0%. 

Mining profits, which make up more than one quarter of company profits, increased by 5.8% in the September quarter. 

Profits outside of mining were weaker, falling by 0.7% in the September quarter.

Inventories lifted by 0.8% in the September quarter, which was above consensus and out own expectations. This suggests inventories could provide a small contribution to GDP growth in the September quarter.

ANZ job ads jumped 1.7% in November, after rising by 1.0% in October. For the year to November, job ads have increased by 6.1%, up from 5.2% in the year to October. The recent momentum in job ads suggests ongoing moderate growth in employment.

The MI inflation gauge rose by 0.1% in November. It was the largest increase in four months. For the year to November, inflation increased by 1.5%, an unchanged pace from the year to October.

The AiG performance of services index rose to 51.1 in November, from 50.5 in October. It was the highest reading since July 2016. 

The reading is now further above 50 signalling more rapid expansion in services sector activity in November.

Share Markets: 

Investors took the Italian referendum defeat and resignation of Italian PM Renzi in their stride. Share markets in Asia were mostly weaker following the result, but the Euro Stoxx rose 1.3% overnight.

US shares were also higher. The Dow rose 0.2% and the S&P500 was up 0.6%.

Interest Rates: 

US treasuries were initially sold off, but then losses were pared later on. Yields on 10-year notes rose to as high as 2.45%, but then fell back to 2.34%.

Yields on Australian bond futures lifted. The 3-year lifted 2 basis points to 1.97%, while the 10-year rose 5 basis points to 2.81%.

Foreign Exchange:

The euro initially fell when it was becoming clear that the referendum was going to fail and that Italian PM Renzi was going to resign.

However, losses were muted and very short-lived - the euro rose to a high of nearly 1.08 against the US dollar early this morning.

While the political and economic situation in Italy has become more uncertain, there are still a number of scenarios to play out before 'Ita-leave' becomes a strong possibility.

The AUD held within the 74.2-74.6 US cent range following the referendum and then rose overnight in step with the broader improvement in sentiment.

The NZD also had a muted reaction to the resignation their long-running PM Key, and ended the session unchanged.  

Commodities:

Oil prices were up marginally, but appear to have stabilised after rallying on the back of the OPEC decision to cut output. Gold prices fell as sentiment improved.

Prices of other commodities, including copper, zinc and iron ore rose.

China:  

The Caixin services PMI increased to 53.1 in November, from 52.4 in October. It was the highest reading since July 2015 and signals more rapid expansion in services sector activity in November.

The employment component of the index rose to its highest since May 2015.

Europe: 

Retail sales rose 1.1% in October, following a 0.4% contraction in September. Sales in Germany led the increase, lifting 2.4% in the month.

Retailing in France edged up just 0.1% and contracted 0.1% in Spain. 

Japan: 

The services PMI rose to 51.8 in November, from 50.5 in October.

The index is further above 50, pointing to more rapid expansion in Japanese services sector activity in November.

It was the highest reading since January 2016, although the employment component of the index remained in contractionary territory for the six consecutive month.

United Kingdom: 

The Markit/CIPS services PMI edged up from 54.5 in October to 55.2 in November, the highest reading since January and point to solid activity in the final months of the year.

United States: 

The ISM non-manufacturing index rose from 54.8 in October to 57.2 in November, the highest in just over a year. Business activity and employment sub-indices drove the improvement.

The alternate Markit services PMI was revised slightly lower in the final estimate for November from 54.7 to 54.6, and down from 54.8 in October.


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