Speaking to InvestorDaily, AMP Capital chief economist Shane Oliver said that over the last couple of years the Australian share market has taken its lead from falling interest rates and the falling
Australian dollar, both of which have provided a lift.
“Putting the bad news of Toyota and Qantas aside, there was good news in terms of profit results,” Mr Oliver said.
“They weren’t fantastic, but they confirmed that profit growth is returning so the share market was able to rise because of those good earnings results,” he said.
“The share market paid basically no attention to talk of layoffs and the negative corporate news.”
Mr Oliver’s comments come after last week’s release of a Roy Morgan Research report, as reported by InvestorDaily on March 11, that showed business confidence had been impacted by negative corporate news.
“The decline in business confidence in February was anticipated given the number of very negative high profile stories during the month,” Roy Morgan Research industry communications director Norman Morris said.
“These included the federal government’s decision not to support SPC, the plans by Qantas to reduce their workforce by 5,000, Toyota announcing that it was ceasing car manufacturing in Australia and the very big impact this will have on the parts suppliers as it was the last car manufacturer, Alcoa announcing that it was closing several smelters, and the Telstra decision to cut employment in its directories division,” Mr Morris said.
The finance and insurance sector has consistently achieved higher than average business confidence results over the past six months, according to the report.
“I know the banks have been doing reasonably well and I guess the financial sector is stronger than it was a year or so ago, particularly for wealth managers things have picked up,” Mr Oliver said.
“But there is still a degree of caution around and a lot of talk of cost cutting,” he said.
“I wouldn’t have thought the financial services sector is quite as strong as the Roy Morgan Research survey might suggest.”
Looking to other sectors, Mr Oliver said sectors that are showing signs of improvement include home builders, retailers and the services sector generally.
“February was a difficult month,” he said, citing the lay-offs announced by Toyota, Alcoa, Forge and Qantas.
“While we are only two weeks into March, there seems to be more positive economic data which may help; it will be interesting to see how confidence tracks in March.”
