The resurgence of global equities during 2017

(Australian Associated Press)

MARKETS: ASX ON TRACK FOR ANOTHER SOLID YEAR

Nearly 10 years – and several false alarms – later, the benchmark S&P/ASX200 stock index scaled the psychologically important 6,000-level peak in November.

Since then the index has slipped back below 6,000 but remains close and the local market has already delivered solid gains of six per cent so far in 2017, bringing it close to last year’s seven per cent rise.

The year’s gains have come with the recovery in corporate profits – best reflected in the turnaround for mining and energy companies after the 2015 collapse in commodities prices.

A sharp increase in dividends from the sector helped lift sentiment and investors are counting on continued Chinese demand for minerals to support profit growth.

The local market has also been buoyed by a near-20 per cent surge on Wall Street this year, as signs of a strengthening US economy and hopes for corporate tax cuts have driven US stock indices to record highs.

Australian shares could be in for another solid year in 2018, with Macquarie analysts forecasting the main index to climb to 6,500.

RETAIL: TRADERS FACE CLOSED WALLETS

Aggressive discounting and catatonic consumer spending made 2017 a tough year for retailers who now face competition from online behemoth Amazon.

Retail trade figures have justified Reserve Bank concerns that weak wages growth and high household debt have put the brakes on consumer spending.

Sales across the country were flat in September following two months of declines, a sign demand has stalled despite aggressive price cuts.

The influx of overseas competitors continues, with Amazon and US retailer TK Maxx following H&M, Zara and Uniqlo’s arrival in recent years.

Competition is causing headaches for incumbents, with Top Shop Australia, Marcs and David Lawrence toppling in 2017, while sales fell at David Jones and Myer.

Myer’s annual profit dropped 80 per cent in 2016/17 and the company is battling Solomon Lew, who, as its largest shareholder, has attacked the board for the retailer’s performance.

The supermarkets had their own problems, with the sector bracing for German discounter Kaufland’s launch in Adelaide, further challenging the Woolworths and Coles duopoly so disturbed already by Aldi.

WAGES

Unemployment is falling and business confidence is strengthening but wages are growing at the slowest pace in at least 50 years.

RBA Governor Philip Lowe recently observed that Aussies are getting used to annual wages growth of around two to 2.5 per cent, down from 3.5 to four per cent a few years ago.

With household income barely edging higher, and debt levels rising, consumers are spending less, keeping inflation weak and interest rates low in an effort to stimulate borrowing and spending.

The Reserve Bank hasn’t moved the cash rate from its record low of 1.5 per cent for 16 months, and most economists expect that run to stretch well into 2018.

The RBA expects wages to gradually increase as employers try to attract staff but Dr Lowe has acknowledged it could take some time, as businesses are also tightening their belts because of tougher competition.

MEDIA

Australia’s media industry endured an eventful year, with the ongoing dwindling of mass-market advertising revenue one of the few constants.

Network Ten slumped into receivership only to be saved by the surprise arrival of US media giant CBS, which conducted a $41 million takeover to trump bids from Lachlan Murdoch and Bruce Gordon.

Fairfax Media finally spun off its Domain real estate business, retaining a 60 per cent stake in the property portal which is now a $2 billion ASX-listed company, bigger in market value terms than its one-time parent.

Seven West Media faced a wave of negative publicity arising from CEO Tim Worner’s affair with former network employee Amber Harrison after details, including a settlement after the relationship ended, were made public in late 2016.

The matter culminated in a highly publicised court battle which the broadcaster won, with costs, after arguing Ms Harrison had breached a confidentiality agreement.

In regulatory matters, the media industry had a win when parliament changed laws to allow a proprietor to control more than two out of three platforms – TV, radio or newspaper – in one licensed market.

BANKS

The federal government levy, more allegations of wrongdoing, and the announcement of the royal commission they had been trying strenuously to avoid: even another year of record profits couldn’t make 2017 a year to celebrate for Australia’s big banks.

Commonwealth Bank is looking for a new chief executive after Ian Narev took the fall for alleged breaches of counter-terrorism and anti-money laundering laws, while ANZ and National Australia Bank each paid $50 million to settle allegations of rate manipulation by traders, leaving Westpac to fight ASIC alone.

All four banks have been spinning off assets to focus on their core operations, potentially reducing revenue but also cutting costs, building capital and removing risk.

And there was more good news to go with those $31.5 billion profits.

The big four are as stable as ever after APRA intervention led to a derisking of the housing market and bigger capital reserves, while the royal commission will also look at superannuation – which could be good news for lenders on the lookout for new revenue streams.

The passing of the media reform package could result in a wave of mergers in 2018.

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