5 Apr 2019
Global stock prices higher on trade deal optimism
- Global stock prices finished higher this week, boosted by expectations of an impending trade deal.
- Local stocks finished lower this week with no real cause. Possibly some profit taking and/or some negative sentiment regarding the Coalition’s budget proposal and Labor’s budget reply.
- In local stock news, Woolworths has announced they will return the proceeds of their petrol business sale to shareholders via a $1.7bn off-market buy-back, which will also result in a significant franking credit release prior to the Federal election.
- Rio Tinto has confirmed that bad weather and a fire will cut its iron ore production in 2019, but said it remains on track to meet the lower end of full year production guidance of 338-350 million tonnes. The Rio share price moved above $100 this week for the first time since June 2008.
- Wesfarmers showed no signs of giving up in its approach to acquire Lynas Corp, despite being rebuffed by the board, with the MD of Wesfarmers stating he’s keen to work collaboratively with Lynas.
- The Aussie dollar remains stubbornly above the US70c mark as foreign investors see value in Aussie bonds in light of house price falls and a slowing economy. Absent the foreign bond buying, the dollar would be a little lower, but not markedly lower given stronger commodity prices of late.
- Oil prices pushed higher this week as concerns arose regarding supply disruptions via Iran and Venezuela, whilst the number of US shale rigs in operation contracted last week.
- Aussie building approval figures were better than expected with 19% growth in February versus expectations of a decline. The sudden turnaround appears to be in apartment approvals, with particularly strong numbers out of both NSW and VIC.
- Aussie retail sales ticked up 0.8% in February, following a 0.1% rise in January and a 0.4% decline in December. The February number came in well above expectations, boosted by food sales and take away food.
- The Australian trade balance came in much stronger than expected, the result of an 11% increase in metal ores and mineral exports.
- US private jobs data showed job growth slowing to an 18 month low. The data showed 129,000 jobs filled in March, which whilst impressive in absolute terms, may be first signs of the labour market slowing.
- US consumer spending barely rose in January and income increased modestly in February.
- UK construction activity slowed for the 2nd consecutive month in March as Brexit concerns took hold.
- Germany’s manufacturing index slid to an 80 month low and Eurozone factories registered their worst month for nearly 6 years.
- A survey showed a surprise rebound in China’s manufacturing activity, returning to growth for the 1st time in 4 months, whilst China’s services sector picked up to a 14 month high in March as demand improved at home and abroad.
- American and Chinese officials are reportedly closing in on a trade deal, having resolved most of the outstanding issues in their trade dispute.
- The British parliament rejected PM May’s Brexit deal for a 3rd time, which raised the real possibility of a Brexit with no deal, in light of the EU’s short deadline extension to April 12. As it stands right now; the majority of parliament don’t want to exit, but feel obligated to do so given the referendum; the majority of British people don’t want to exit but don’t get to vote again; and the EU doesn’t want Britain to exit, but needs to be seen to be tough on those wanting to exit. Go figure.
- The Federal government announced their budget proposal with plenty of infrastructure spending and tax cuts across the board, in light of a bumper surplus, and more surpluses expected in the next 3 years. Labor’s budget reply had greater emphasis on low and middle income tax cuts, more labour market initiatives, more spending on health, and less infrastructure spending. Both talked up economic management and reducing government debt over the long term. Labor intends to proceed with their franking credit proposal.
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