22 Mar 2019
US Fed done raising rates
- Local and global equities pushed higher this week, with local market boosted by resource stocks, whilst global markets were supported by US tech stocks.
- European equity markets got a boost from potential M&A activity in Germany with merger talks between Deutsche Bank and Commerzbank, and Allianz potentially combining its asset management division with DWS (the asset management arm of Deutsche Bank). Both deals make plenty of sense, however, will likely face fierce opposition from quite powerful local unions given significant potential job losses.
- In local stock news, Westpac announced the shedding of its personal advice business, which will cost close to $300m in one off costs.
- Platinum Asset Management shares fell more than 10% during the week after founder Kerr Neilson and his wife sold a 10% stake in the company. They sold the stake at a below market price, but investors lost sight that Neilson and his wife still own 42% of the company.
- ANZ Bank has said it is loosening some of the restrictions it put on interest only mortgage lending. The lender said it would start offering customers an interest only period of up to 10 years and would allow interest only loans with a less than 20% deposit. Both measures will go some way to supporting the housing sector, but the loan approval process remains restrictive.
- The Australian unemployment rate fell to 4.9%, but employment rose by less than 5,000 jobs in February coming in well under expectations.
- The US central bank turned even more dovish this week, with the bank seeing no need to raise rates further this year, given mixed economic data and risks associated with Brexit and trade wars. The bank also released details of a plan to end the monthly reduction of their balance sheet (ie. quantitative easing unwind).
- US business conditions fell to their lowest level in almost 2 years, coming in well below economist expectations.
- US jobs data showed that job openings rose to their 3rd highest level on record in January.
- The Chinese government has now indicated they will largely do whatever it takes to support economic growth this year and they stand ready to roll out more stimulus as needed.
- China’s housing ministry said it would slash the time needed to obtain approvals for housing projects.
- Further Brexit delays after PM May was informed that she could not put her deal to a new vote unless it was re-submitted in a fundamentally different form.
- UK PM May requested a 3 month extension from the EU to get the Brexit deal through the UK parliament. The shorter time extension is a function of not wanting to encourage another referendum and also trying to minimise the continuing current divisions occurring within both major parties.
- US President Trump indicated that US tariffs on Chinese goods could remain for a long period of time, throwing some uncertainty as to a near term trade resolution. It looks more likely that he’s trying to exert pressure to get the deal done and wants to ensure adherence to any deal struck. He also indicated we could see a deal in the next 3-4 weeks.
- In a supportive gesture to a trade war resolution, Chinese lawmakers have approved a new law against the forced transfer of technology by foreign companies. However, Chinese law still “mandates” the use of a local partner when a foreign company wants to set up business in China.
- US President Trump inflamed the EU by threatening pretty severe economic pain if they did not engage in trade talks. Looks like Trump has moved on from China and has EU trade firmly in his sights.
If you would like to discuss any of the information or meet with us, please feel free to call or email us by clicking here.