International News (Issue 349) – 1 May 2015

International News

Well as I alluded to earlier, the sell-off in bond markets was the major theme for investors this week.

Greece

Greece, if anything, has actually played as a positive for markets this week, in large part due to the removal of the combative Finance Minister Yanis Varoufakis from the Greek negotiating team. As the week draws to a close and Greece continues to scramble for funds to pay over 2m civil servants their monthly wage, it seems more likely the government there will relent and agree to certain asset sales. This had been a major sticking point for the government, but now seems inevitable to be back-tracked upon. It’s either that or the wages don’t get paid, and that’s hardly a popular outcome for a government to have to face.

The next IMF repayment is due Tuesday next week and we will surely see a consensus built ahead of that that allows the Greek government and banking system to continue to operate with the grace of their EU and IMF lenders.

China

In China, the reforms & stimulus continues to come apace. This week there were very strong rumours that the government would further seek to raise domestic liquidity by allowing banks to swap out debt held by local-government entities (much of which is non-performing) in exchange for loans from the central bank. This for want of a better term, is China’s version of ‘Quantitative Easing’.

United States

In the US this week, the Federal Reserve sat and as expected declared no change in interest rates. It was hard to draw anything out of the commentary, but for choice the Fed acknowledged the recent run of softer US economic data, leading many to confirm that September looked the best bet for commencement in US monetary tightening.

Apple (AAPL) posted another set of strong profit figures and extended the size of their capital return plan to a whopping US$200bn by March 2017 – that is CBA & ANZ combined. Profits were strong, guidance was good, and the interesting revelation that AAPL sold more iPhones in China last quarter than the US, speaks volumes for where the world and AAPL are going.

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