Chief Executive Officer of Montgomery Investment Management, David Buckland has over 40 years of industry experience.
David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
After jumping nearly 20% over the September 2012 Quarter, Wednesday saw the leading 50 European blue chip stocks from 12 Eurozone countries, as measured by the STOXX, decline by 2.7%. The Spanish market, which had rebounded 35% from its low point in early July, fell 3.9%. On Thursday, Spanish Prime Minister Rajoy announced his fifth austerity package in nine months of Government. The target is to cut the budget deficit from 6.3 percent in 2012 to 4.5 percent in 2013.
Economists responded by saying “they’ve increased the taxes for next year and cut spending but they didn’t change the growth forecast”. Economists expect the Spanish economy to contract around 1.5%, while the Government is forecasting a contraction of only 0.5%. With their ten year bonds selling above 6%, Spain will likely need to raise the white flag and go “cap in hand” to the European Central Bank for another bail-out. Spain’s declining property market and 25% unemployment is causing a significant solvency issues for their banking system, as the contraction of private sector lending continues.
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Data released yesterday from “worldsteel” on global iron and steel production confirmed slowing output. Global steel production for August 2012 was down 1% year on year. Steel production from the European Union for August was down 15% year on year, taking annual output to 144 million tonnes, or 9.6% of the 1.5 billion tonnes per annum of global production. Chinese steel production has slipped in recent months from an annualised 750 million tonnes to 700 million tonnes, or 47% of global production.
For 2013, Australia’s Bureau of Resources and Energy have recently cut their iron-ore forecast to US$101/ tonne, while many brokers are still assuming a price of at least US130/tonne. We continue to watch the steel numbers closely.
Fred Smith, CEO of FedEx, the express parcel and logistics operator, said that over the last 25 years global trade had generally grown at a faster rate than the world economy, but over recent months that process had broken down. “That’s what is really going on – that exports and trade have gone down at a faster rate than GDP”. Although Fed Ex announced its revenue for the three months to 31 August 2012 was up 3% to $10.8 billion, it guided down its net earnings for the year to 31 May 2013 to around $6.40 per share. At the current $87, FedEx is on a prospective PE of 13.6X.
Yesterday’s Australian Financial Review highlighted comments from Mark Williams, Shell’s global downstream director.
“The global economy seems weaker to me than the numbers indicate”, said Mr Williams. “I still expected more suction out of China than we’re getting. I’m just a bit uneasy with what we are seeing in terms of fuel demand and chemical demand”.
