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Kaufland is definitely here

AFR reported that the German supermarket chain is building up its executive team in Australia (and sending them to Germany for training).  So far, two locations have been secured for Kaufland: in Adelaide and in Melbourne.  Kaufland operates large footprint outlets (20,000 sqm).  It should be noted that Kaufland’s parent, Schwarz Group, also owns the discount chain Lidl.  If Lidl starts opening stores in Australia, this will be the next nail in the coffin of the local operators.

China’s growth target below 7% this year

Reuters reported that China aims to expand its economy by around 6.5% this year, the same as in 2017.  In the past some experts expressed a view that China needs at least 7% growth for their financial system to function well.  Interesting to see how this stress will be managed.  Combined with US trade friction, China is sailing through increasingly stormy waters.

More pressure on Euro

According to Reuters, Italian voters delivered a hung parliament on Sunday, flocking to anti-establishment and far-right parties.  This cast Italy into a political gridlock that could take months to clear.  According to NAB, “There is a highly uncertain landscape that this election has thrown up.  It adds to a period of uncertainty and is euro negative in the near-term at least.”

Kohl's gets creative with space sharing

USA Today reported that Kohl's (a US department store with over 1,000 outlets) will shrink the floor plans of about a dozen of its larger stores, and lease space to German discount grocer ALDI as part of a test to cut costs and drive more traffic to its stores. Kohl's could also extend the test to include other grocers or other types of retailers.  Sounds to us like a better (and less risky) idea David Jones’ plans to have another go at their own grocery department.

US has unleashed a flurry of economic activity

The Star Tribune in Minneapolis (US) commented that Best Buy reported its biggest holiday sales season in 14 years, and booked a 9% same-store sales increase in the fourth quarter. The electronics retailer fended off competition from Amazon and other online rivals, as confident consumers snapped up smart home systems, new video games, and other gadgets.  Personalities at the top aside, the US Government seems to have succeeded in unleashing a flurry of economic activity.

Tax reduction flow on effect

Australian politicians continue to debate the pros and cons of tax reductions.  In the meantime, the National Retail Federation published results of its survey, indicating that about half of consumers who expect a tax refund this year will put the money into savings and 35% will pay down debt. Our simplistic analysis tells us that the 15% (that remains) will result in additional spending.

US company's share buy backs surge

The Wall Street Journal reported that US companies are buying back their shares at an aggressive pace. Announced buybacks have surged since the US passed a $1.5 trillion tax cut in December, exceeding $200 billion in the past three months. Some of the biggest buyers include Cisco Systems, at $25 billion, Wells Fargo, at about $21 billion; and PepsiCo, at $15 billion.  Clearly, these companies know something that convinced them that buying their own stock is a good investment. A clue for the market?

SFG leaning towards raising equity

AFR reported that Specialty Fashion Group (SFG) is leaning towards equity raising rather than a fire sale.  Lazard Asset Management, the largest institutional shareholder, refused to sell its 13% holding to a potential bidder. SFG is under pressure as its earnings have fallen more than 60 percent since 2010.

Trump imposes tariffs on steel and aluminium

The Wall Street Journal reported that the US President has decided to impose tariffs of 25 percent for steel and 10 percent for aluminium.  Markets tanked in response, expecting any action to impose tariffs to escalate tensions with China and other US trading partners. The Commerce Department has previously recommended tariffs on all steel and aluminium imports.

Not all millennials are comfortable with credit

Bloomberg reported that US millennials who lived through the Great Recession are avoiding credit card debt. Only about one in three millennials carry a card, and the generation is more likely than older consumers to use cash or debit cards instead of traditional credit cards.

Will interest rates end US market recovery?

The Wall Street Journal reported that by the end of February, the S&P 500 and Dow Jones Industrial Average were up 5.1% and 4.9%, respectively, from their February lows.  The big question remains about inflation and the related expected interest rate rises in the US – has this already been factored in by the markets, or are we in for another wild ride?