The testing of this big rally has started with poor US retail sales giving the market a reason to sell off. The April 0.4% fall was the second month in a row that retail has fallen. It may be the real test, as these figures should reflect confidence from the big rally, which has topped 30% in the States. Banks also struggled again on Wall Street.
The retail figures surprised as chain stores had reported a good April. The week ahead has some more economic reports including industrial production and consumer sentiment. Some good bell weather companies such as Nordstrom and Wal-Mart will report as well.
Out of the Budget, I think the Government had to spend and I was happy they did not hurt the post-tax super contributions of $150K a year over three years rule, though they did freeze its growth. I think we recover quicker than Treasury forecasts and so the deficit of $57.6 billion will be smaller, which will make them look better before next year’s election.
There are some nasties for high-income people like the slug on hobby farms, etc., but these guys are taking from the better off and the savers to keep the spenders in the game. Lower income people proportionately spend more of their income, economists argue.
The $22 billion for infrastructure will be good for related share companies but the post-Budget news that really excites me is the report that global central banks see signs of recovery and the SMH headline: “China’s surge in metal imports gives hopes of recovery.”
I love a positive headline, as we don’t get many from the media but more importantly, the quicker China comes back, the quicker we recover and taxes come in to pay off the deficit and debt.
The Oz dollar has followed Wall Street down and is 75.33 US cents.
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