Category archive: Finance News

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US-China Trade War Sinks AUD, Global Stocks

The rising tension between US and China in trades has sent almost every major asset sinking, including oil, global stocks and Australian dollar.

The Trump administration announced that it will impose a 10 per cent tariff on $US200 billion worth of Chinese goods, including consumer items such as clothing and refrigerators. This decision followed China’s implementation of reciprocal tariffs on $US34 billion in US import goods.

The Dow Jones was down 0.9 per cent to 24,700, while the S&P and Nasdaq closed 0.7 per cent and 0.6 per cent lower respectively.

Chinese stocks declined by 1.6 per cent, while European markets such as Paris, London and Frankfurt lost between 1.3 and 1.5 per cent each. Japan’s Nikkei also dropped by 1.2 per cent, and Hong Kong’s Hang Seng dipped 1.3 per cent.

Gold fell 0.9 per cent to $US1,244.4 per ounce, while brent crude oil was down 6 per cent to $US74.17 per barrel.

Australian dollar plunged 1.2 per cent to 73.65 US cents, and is expected to continue declining. “We remain of the view that trade tensions are likely to get worse before they get better and as such we still see more downside risk for the Australian dollar,” NAB’s senior foreign exchange strategist Rodrigo Catril told the ABC.

AGL Announces Power Price Drops

AGL has announced price drops for power in New South Wales, Queensland and South Australia, following competitor Origin’s similar move this week.

Residential electricity prices will be cut by 0.3 percent in NSW, 1.5 percent in Queensland and 0.4 percent in SA, much lower than what market analysts predicted.

“While these price cuts are slight, they’re part of a downward trend that is emerging as more investment in new sources of supply comes into the market,” said AGL’s chief customer officer Melissa Reynolds, referencing the increasing network and green costs.

“We understand power prices have been high and that has put pressure on many households.”

On Tuesday, Origin announced that it will cut residential electricity prices in south-east Queensland and SA by 1.3 percent and 1 percent respectively, while maintaining the same prices for NSW and the ACT.

Origin’s Power Price Changes. Source: Origin/ABC

Both drops are far lower than the Australian Energy Markets Commission’s (AEMC) forecast, which expected 5.8 percent fall in NSW, 7 percent in south-east Queensland and 6.9 percent in SA in 2018-19.

Ricoh Becomes Australia’s First Carbon-Neutral IT Services Company

Ricoh has become the first IT services company in Australia to achieve carbon-neutral status.

Following its achievement as the first tech services organisation in the country to achieve a carboNZero certification, Ricoh went further in its efforts to reduce its greenhouse gas (GHG) footprint. The company worked closely with not-for-profit Enviro-Mark Solutions to develop a multi-pronged GHG reduction strategy.

The strategy covered a number of areas, including a reduction in electricity consumption, freight and fuel usage, staff air travel and waste to landfill.

“Every aspect of our national operations was put under the microscope so we could understand the sources of all our existing GHG emissions,” said Tori Starkey, general manager – marketing at Ricoh Australia. “Taking such a holistic approach meant we would be well placed to make our subsequent activities as effective as possible.

“Far from being a set-and-forget exercise, these strategies will continue to be evaluated and improved over time. At the same time, customers are enjoying more efficient service and product deliveries while also being able to achieve their own footprint improvements … With increasing attention being paid to achieving a reduced corporate environmental footprint, many businesses have set a goal of making their operations carbon neutral. For Ricoh Australia, this goal has become a reality.”

Trump’s Cancellation of North Korea Summit Sends Markets Down

US and European stocks fell after US president Donald Trump cancelled a planned June summit with North Korean leader Kim Jong-un.

On Thursday morning, Trump cancelled the June 12 Singapore meeting, citing Pyongyang’s “open hostility” even though North Korea followed through on its pledge to destroy tunnels at its nuclear test site.

The Dow Jones fell 75.05 points (0.3 per cent) to finish at 24,811.76 while the S&P dipped by 5.53 points (0.2 per cent) to close at 2,727.76. Nasdaq also dropped 1.53 points (0.02 per cent) to 7,424.43.

European bourses had a sharp dip, with London and Frankfurt down by almost one per cent each.

The markets were also impacted by Trump’s order of investigation into vehicle part imports, which could lead to tariffs on foreign auto goods. US carmakers such as General Motors and Ford rose with 1.4 and 1.5 per cent respectively.

Rio Tinto Appoints Simon Thompson as New Chairman

Rio Tinto has appointed former investment banker Simon Thompson to be its new chairman starting March 2018.

Serving as a non-executive director in the company’s board since 2014, Thompson will be replacing 63-year-old Jan du Plessis.

“Mr Thompson has over 20 years’ experience working across five continents in the mining and metals industry,” the mining company said in a statement. Thompson has also chaired private equity firm 3i Group and British exploration company Tullow Oil.

Du Plessis also welcomed the changeover. “I am really pleased to be succeeded by Simon, especially given how closely we have worked together since he joined the board some three years ago,” said du Plessis. “I am handing over the baton at a time when the business is in great shape and Rio Tinto has the strongest balance sheet in the sector.”

Thompson said: “I look forward to leading the board as we work with [chief executive Jean-Sebastien Jacques] and his team to ensure that Rio Tinto continues to deliver superior returns for its shareholders by maintaining its capital discipline and ‘value-over-volume’ approach.”

Upon taking over the position, Thompson is expected to deal with increased scrutiny surrounding issues like alleged coverup of losses in Mozambique in 2011 and corruption in the Republic of Guinea.

New Zealand Experience Shows Same-Sex Marriage Could Provide Huge Economic Boost for Australia

Andrew Gorman-Murray, Western Sydney University

Even though it’s still uncertain as to when Australian same-sex couples will be able legally to wed, New Zealand’s example shows how much this could be worth to our economy.

New Zealand has long been a destination for international wedding tourism. This was boosted from August 2013, when New Zealand same-sex couples could also marry. The majority of same-sex weddings between overseas couples conducted in New Zealand have been between Australian couples unable to marry at home.

In 2016, 2,490 heterosexual couples from other countries celebrated marriages or civil unions in New Zealand, comprising 11% of all heterosexual couples’ ceremonies. The proportion of same-sex couples from other countries entering into marriage or civil union in New Zealand has been even higher.

In 2016, 49% of same-sex marriages or civil unions in New Zealand were between overseas couples, and Australians accounted for 58% of these couples. Altogether, Australian couples comprised 29% of same-sex marriages or civil unions celebrated in New Zealand in 2016.

The figures for 2016 are not an outlier: since 2013, Australian couples have made up 25% or more of same-sex weddings celebrated per annum.

All the business of marriage

This phenomenon has both social and economic implications. Trans-Tasman same-sex wedding tourism underlines a real desire for marriage by Australian same-sex couples.

New Zealand wedding operators have been willing and able to absorb this demand. While of course the significance of marriage lies in the couple’s enduring commitment and love, supported by family, friends and community, there is also tangible economic value from the wedding celebration.

The wedding industry is a complex network of small and medium businesses. It includes everything from planners, celebrants to florists, photographers and entertainers. Beyond the ceremony itself, the industry also includes operators of honeymoon destinations.

In 2015, ANZ economists Cherelle Murphy and Mandeep Kaura crunched some numbers on the economic benefits of same-sex marriage in Australia. They used 2011 Census data on the number of same-sex couples in Australia, and we might update their estimate using the more recent 2016 Census figures.

Murphy and Kaura estimated the average spend on a wedding ceremony and reception at A$51,000. The 2016 Census counted 46,800 same-sex couples.

They applied other survey findings from 2010, and further assumed that out of the half of all same-sex couples who will want to marry, half will do so in the year after same-sex marriage is legalised.

The sentiments expressed in the 2010 survey findings may have shifted since then, especially in light of the marriage equality postal survey. But let’s use that proportion for consistency.

We might suppose 11,700 same-sex couples will marry within one year of the legalisation of same-sex marriage, spending on average A$51,000, totalling almost A$597 million dollars in wedding and reception costs.

This does not include honeymoon spending. For those couples choosing to honeymoon within Australia, we can add spending on travel and accommodation.

A 2015 survey by Bride To Be magazine found the average spend on wedding and honeymoon at A$65,482. This figure is clearly biased towards dedicated bridal magazine readers – those who might be willing to save up and fork out more for their perfect wedding and honeymoon.

Arguably many would not be able or willing to spend this amount. Nevertheless, A$65,482 would be equivalent to an annual salary for many, so this is suggestive of how lucrative some segments of the wedding and honeymoon market are.

Apart from what the couple (and their families) spend on the wedding and honeymoon, we might also consider guest spending. Obviously, purchasing wedding gifts contributes to the retail sector.

Out-of-town guests also have to pay for travel, accommodation, food and beverage, and other expenses. Some couples opt for destination weddings, with benefits for tourism operators.

Some operators hope that Australia, like New Zealand, might become a destination for international same-sex wedding tourism, and so provide a boost to the tourism industry.

In addition to this, Murphy and Kaura found other economic benefits of same-sex marriage, such as increased state government revenue from marriage licence fees and ceremonies in state-run births, deaths and marriages registries.

The ConversationWith the debate on same-sex marriage now turning to whether or not businesses will be able to refuse couples based on moral objections, it seems at least the economic case incentive is there for these businesses to say “yes”.

Andrew Gorman-Murray, Professor of Geography, Western Sydney University

This article was originally published on The Conversation. Read the original article.

Trouble in Eden? Apple Stocks Drop

Yes, Apple stock prices have experienced a few ups and downs since the announcement of the upcoming iPhone X with certain details seemingly leaving investors not so confident in what Apple are about to bring to the table, and when. But, according to CBA, Apple stocks usually rise or fall the day of their product announcements then drops just after the launch before gaining traction a few weeks post launch and holding fairly steady from then on. Since the stocks have dropped by 0.90%, they’re still within the predictable ‘OK’ area and seem to be following the pattern so far.

Since most have forgone replacing their devices in anticipation of the upcoming Apple launches so spirits and stocks were at a predictable high withe with the announcement of the new Apple watch but dropped after the announcement of the iPhone 8 and extensive leaks of the iPhone X. Factors such as the questionable new features like the facial recognition and the potential security issues it implies, rumours of production delays for the new OLED screen and the launch delay until the next fiscal year, seem to be major contributors to the stocks’ recent drops.

Nonetheless, Apple is a brand that has built itself into a brand well known for its exclusivity with a very loyal market, often implied whenever you here ‘Apple user vs Android User’. The ‘us and them’ mentality has always been a subtle yet convincing selling point for them and there is no doubt that the queues for the iPhone 8 will still be as long as ever, with crazy campers and maybe a broken screen more.

 

Aussie Wage Inequality Rising – Are We the Next America?

Well this is a somewhat concerning thought; with the growing wage inequality (read: absolute struggle) it looks like we’re on track to developing a similar unhealthy work culture we see form America. ‘What is that culture?’ you may ask? Well in America there is a constant struggle with employers demanding longer hours for lower wages and diminishing job security, meaning that company A will demand that person A work longer hours with no over time pay and maybe time in lieu (but that’s only because the company loses a normal rate of pay instead of increased over time/weekend pay). Person A is reluctant to refuse the unfair offer because they know that all the recent job cuts mean that there are plenty of more desperate people who are willing to take their place despite the unfair agreement.

 

You would have heard about the government reducing the amount of weekend pay that employees in certain sectors get and this could very well be just the beginning. Bill Shorten himself said that the direction that this economy is going is not at all in our favour.

 

So in a climate where the poor struggle more and still get poorer, while the rich get away with less tax and get richer, what are we to do? Can we do anything? Will we soon see the day where hospitality workers are paid $3-$10 an hour and must scrounge to hell and back to get enough tips so that they don’t lose money? I mean… we’re already seeing the rich benefit from the ability to live and work in better areas with better jobs, while the more disadvantaged spend more on travelling to work, get paid less to do their job and are more likely to live in worst conditions and more dangerous neighbourhoods.

Australia’s Housing Crisis to Continue for Another 40 Years, Report Finds

Australia’s housing crisis could last for another 40 years unless changes are made to the market, a report by the Committee for Economic Development of Australia (CEDA) found.

CEDA said housing affordability is unlikely to improve for the foreseeable future, especially in capital cities. “Barring any major economic jolts, demand pressures are likely to continue over the next 40 years and supply constraints will continue,” said CEDA.

The report said the current structure of land release discourages house developers from getting more supply in the market, leading to increasing numbers of Australians retiring without owning a property.

The committee said changes are needed now at all government levels to avoid longer-term consequences. It made eight recommendations to ease the demand, including providing stronger legal protection for tenants, replacing stamp duty with land-based taxation, increasing capital gains tax and relaxing house planning restrictions.

CEDA research and policy committee chairman Rodney Maddock emphasised the latter, saying the government needs to allow more and bigger residential buildings to be built.

“We’ve got a free market on the demand side but all sorts of restrictions on the supply side,” said Maddock.

“Overall, the conclusion must be that our housing system has been designed – inadvertently, of course – to supply new additions at a lesser rate than needed to keep housing prices and affordability within acceptable limits,” said CEDA.

Australians Increasingly Under Financial Stress, Report Finds

Concerns over rising costs of necessities, stagnant income growth and prospects of increased loan rates are stressing Australian households, a survey has found.

The latest ME Household Financial Comfort Report, which surveyed 1,500 Australian households, revealed that concerns over budget balancing are increasing, as 51 per cent are found to have no spare cash at the end of each month. Rising costs of groceries, fuel and utilities have been blamed, along with weak salary growth and rising underemployment.

“Australian households are under financial stress,” said ME Bank consulting economist Jeff Oughton to ABC’s AM. “They’re concerned about the rising cost of bills but also there are income woes, interest rates are starting to rise and there’s mortgage and rental stress.”

While the unemployment rate has gone down, underemployment is still strong, with 27 per cent of casual and part-time workers saying they were eager to increase their hours.

Furthermore, 68 per cent of the respondents reported wage fall or stagnation in the past 12 months, and 40 per cent of households in debt are becoming less confident about their ability to repay their mortgage.

RBA’s eventual plan to lift the cash rate is also expected to worsen this burden on Australians “as it will impact monthly cash flows, ability to pay off debts, save and spend”, Oughton said. “It will bite into those young couples with children, single parents and also generation X-ers who are concerned about the impact on their monthly cash flows from rising rates.”