9 Nov 2018
Equity markets up on US election result
- Local and global equity markets mostly rose on the back of the US mid-term election result with investors happy that grid-locked politics mean they will largely stay out of the way of Wall Street.
- US company 3rd quarter reporting season has progressed better than expected with close to 80% of companies beating analysts’ estimates.
- In local stock news, Macquarie announced a lift to their 1st half profit by 5% and upgraded guidance with a 10% uplift in profit now expected for the full year.
- Explosives manufacturer Orica revealed stronger revenues and profits in their 2nd half year result, making up for a poor 1st half result, with full year profits and revenue coming in ahead of analyst expectations.
- Westpac reported a full year profit of $8.07bn after customer compensation and legal costs contributed to a weak 2nd half at its consumer and wealth divisions.
- Commonwealth Bank announced a 1st quarter cash profit fall of 5.7% to $2.5bn, with higher funding costs and competition for borrowers putting pressure on margins.
- James Hardie’s shares fell sharply after the company cut its full year forecast range citing uncertain conditions in the US. The market also didn’t like the lack of clarity. 1st half earnings and revenues were strong.
- Oil prices fell after a report indicated that the US government has agreed to let 8 countries (mostly close allies) keep buying Iranian oil after Washington re-imposes sanctions on Iran. Oil prices are now down circa 20% from a month ago. High oil prices benefit Russia and Middle East, largely at the expense of everyone else.
- The Reserve Bank of Australian left rates on hold as expected, but raised their forecasts for economic growth in 2018 and 2019. Their forecasts for economic growth and inflation are now well above consensus economist forecasts.
- US job growth rebounded sharply in October and wages recorded their largest annual gain in 9.5 years. The data may further embolden the US central bank to raise rates further.
- The US Democrat-led House of Representatives will most likely hinder President Trump’s pro-business agenda, which may turn out to be blessing for the US Fed in terms of the quantum and pace of required future rate rises.
- China reported export growth of 15% in October from a year earlier, whilst imports expanded 21%, both easily beating market expectations.
- The US mid-term election went largely as expected with the Democrats winning the lower house whilst the Republicans increased their majority in the Senate. US politics will be grid-locked, Democrats in the lower house will likely use their majority to investigate President Trump further, whilst impeachment proceedings are highly unlikely with the Senate clearly under Republican control.
- A senior White House official has played down rising hopes of a trade resolution, indicating that President Trump has not asked US officials to draw up a proposed trade plan in light of his upcoming meeting with President Xi.
- In contrast, the Chinese Vice President has said Beijing is ready to hold discussions and work with the US to resolve disputes. The problem is President Trump isn’t looking to concede anything, but may now be after losing the popular vote in the mid-term elections.
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