29 Mar 2019
Investors gripped by recession fear
- Local and global equity markets were mixed this week as weak economic data saw recession fears rise early in the week before fading later in the week.
- In local stock news, Wesfarmers unexpectedly made a $1.5bn offer for rare earths miner Lynas Corp. The unsolicited all-cash offer represented an almost 45% premium to Lynas’ share price before the offer. Lynas rebuffed the offer fairly quickly.
- Coles' shares moved higher after announcing a deal with UK online supermarket Ocado which will double home delivery capacity over 4 years.
- Westpac shares fell during the week after UBS analysts estimated the bank would take $830m in customer remediation provisions in its 1st half results.
- Bond markets turned bearish this week with German 10 year bond yields back in negative territory, whilst US 10 year bond yields returned to the lowest level since 2017, as investors grew more certain that the US central bank may be forced to cut rates to stave off recession.
- US manufacturing data weakened with a key component falling to a 21 month low.
- US existing home sales jumped nearly 12% in February, which was the highest number of sales since March 2018 and well above analysts’ expectations.
- The US budget deficit widened in February to US$234bn, which is the largest monthly deficit since February 2012.
- Eurozone manufacturing data fell, led by Germany, where the manufacturing sector contracted for the 3rd month in a row hitting the worst level in 6.5 years. French manufacturing also contracted.
- British politics kept everyone entertained this week with politicians taking control of the House from the PM for two days in order to test support for 8 alternative Brexit proposals, all of which failed to gain any sort of reasonable support. PM May then announced she would step aside if her deal was passed on the 3rd attempt. This garnered some additional support for her proposal, but the DUP, who she relies on for passage, stated they could not vote for her deal.
- The European Union offered the UK a Brexit extension to 22nd May if the UK politicians passed the current deal, or a shorter delay to 12th April to formulate a new plan.
- NSW state elections saw Gladys Berejiklian and her Coalition retain power with a slim majority in the lower house. Counting continues for the upper house, where it looks like minor parties will claim the balance of power with a bigger and more diverse crossbench.
- The US trade representative and the Treasury Secretary travelled to China this week to try and resolve the remaining sticking points in talks to end the trade war.
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