5 Oct 2018
Equity investors panic on US Fed rate path
- Equity markets fell sharply towards the back end of the week following concerns regarding the pace of US central bank rises in light of strong jobs data.
- US tech stocks were hit particularly hard given the very strong run the sector has had over the last few months.
- There was plenty of activity in bond markets as well with investors seeing value in US 10 year bond yields at 3.24%, whilst there was plenty of panic selling in corporate credit ETFs globally. Not all bonds are created equal.
- In local stock news, ANZ bank shares came under pressure earlier in the week after the company flagged a larger than expected hit to its full year profit due to impairments and one-off expenses, with a big chunk coming from customer remediation.
- Ramsay Healthcare’s 51% owned French subsidiary has received the backing of the board of Capio, a large north European hospital operator, to take over the company in a deal worth nearly $1.3bn. Ramsay will use its Euro denominated debt facilities to fund the deal.
- The Telstra chairman has defended multi-million dollar executive bonuses while apologising to frustrated shareholders, in preparation for a showdown with investors preparing to vote against the company’s remuneration plan at its annual general meeting next week.
- Australian retail spending beat market expectations to register a slight rise of 0.3% in August, with department stores posting the biggest gains.
- US job numbers increased less than expected in September, though data for July and August was revised higher, with the unemployment rate falling to 3.7% and annual wage growth pushing up to 2.8%.
- The Chinese announced a steep cut in the level of cash that banks must hold as reserves, with the move aimed at lowering financing costs and spurring growth in light of ongoing trade wars with the US. Expect more Chinese stimulus to come.
- The International Monetary Fund cut global economy growth forecasts for 2018 and 2019 and its 2019 US and China estimates, saying the two countries would feel the pain of their trade war next year.
- President Trump repeated a threat to impose tariffs on US$267bn worth of additional Chinese imports if China retaliates for the recent tariffs and other measures the US has imposed.
- President Trump threatened to remove the US central bank chair Jerome Powell, blaming him for the stock market correction. He also went on to blame the chair making him pay more interest to Deutsche Bank on his US$300m personal loan.
- A news report cited European Union officials discussing a compromise Brexit deal which would see the UK retain some of its pre-Brexit customs arrangement.
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