6 Jul 2018
RBA firmly on hold
- Equity markets mostly finished higher this week, with the exception of some Asian markets which continued to come under pressure following continued trade war escalation.
- A Chinese court temporarily banned US computer chip-maker Micro Technology from selling products in China, whilst the US government moved to block China Mobile from offering services in the US telecommunications market.
- In local stock news, Woolworths and Caltex have announced a long-term strategic alliance, with Caltex supplying fuel for another 15 years and with Woolworths agreeing to a long-term food supply contract
- The Reserve Bank of Australia has left rates unchanged for the 21st consecutive meeting. The bank remains deeply concerned regarding the cooling housing market, high household debt levels, and very low wages growth. No rate rise until 2nd half of 2019 at the earliest.
- Australian retail sales rose in May led by a jump in department store sales, as discounting by retailers continues. In contrast, monthly spending at cafes and restaurants fell sharply. Expect a further slowdown in spending for the remainder of the year.
- Higher commodity exports have resulted in a trade surplus for May. The value of exports rose by 4% with iron ore up 4% and coal exports up 6%. Imports were also up 3%, but export volumes were more significant.
- The US central bank’s preferred measure of inflation hit 2% over the past 12 months, the first time it has hit the bank’s long term target since April 2012. Consumer spending came in below expectations whilst personal incomes rose more than in the previous month.
- Eurozone inflation rose to its highest rate in more than a year, supported by German jobless claims which saw their unemployment rate hit an all-time low of 5.2%.
- A range of Chinese data continued to show expansion from the economy, with services and manufacturing data remaining in positive territory.
- President Trump’s announced tariffs in June on China have now come into effect with US$34bn worth of imports affected. China’s retaliatory tariffs on US$50bn worth of goods have also come into effect. Trump has further threatened another 10% tariffs on up to US$400bn of Chinese goods.
- The European Union has also chimed in warning it’s considering counter-measures on US$294bn of US exports if the US proceeds with tariffs on cars and car parts. Canada has threatened to also take action against the US.
- European Union leaders reached an agreement on immigrationthat potentially removed a key near term political risk for German Chancellor Merkel’s fragile coalition government. The German coalition government also reached their own agreement, thus putting German political risk off the agenda.
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