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Aussie market falls as concerns arise regarding strength of the economy

PSK Weekly Wrap

Equity markets confused on mixed trade war messaging

6 December 2019

Equity markets were mixed following concerns a phase 1 trade deal might not be forthcoming whilst Eurozone and Chinese economic data surprised on the up. Read more..

PSK Weekly Wrap

Equity investors buoyed by potential trade deal

29 November 2019

Local and global equity stocks moved higher on optimism that a phase 1 trade deal is imminent following indications from both sides that a general agreement had been achieved. Read more..

PSK Weekly Wrap

ScoMo accelerates infrastructure plans

22 November 2019

PM Scott Morrison has announced plans to push $1.78bn into the economy over the next 18 months through spending more on roads and rail projects. Some of the funding isn’t new, but rather an acceleration of previously budgeted funds. A good start, but not enough given the current economic backdrop. Read more..

14 Nov 2014

Markets

  • The Aussie market fell as concerns arose regarding our economic woes while we transition away from the resources boom. Declining and lack-lustre business and consumer confidence isn't helping, and the resources sector continues to be under pressure given the declining oil price.
     
  • US markets were supported this week on news that 75% of US companies who have reported so far have beaten analysts’ expectations.
     
  • Chinese shares surged and led most of the Asian region’s markets higher, after the launch of a trading link between Hong Kong and Shanghai was set for next Monday.
     
  • In local stock news, Suncorp Group provided an update with both credit quality and net interest margin (the difference between the rates they lend at versus the rates they pay on deposits) showing improvement.
     
  • Incitec Pivot, a leading global explosives and fertiliser manufacturer, has beaten full year profit expectations on the back of a strong performance from its ammonium nitrate plan in Queensland. They also disclosed a tie-up with an onshore junior gas company to offset rising east coast gas prices.
     
  • BHP Billiton took a hit during the week after announcing it scrapped the sale of its Nickel West business, following failing to attract a buyer for the assets.
     
  • The Organisation of Petroleum Exporting Countries (OPEC), a cartel, has re-iterated it will be prepared to lower oil production if prices fall to US$70 a barrel. The oil price is now suffering its longest losing streak in 16 years.
     
  • Gold eased from four year lows as the US dollar eased – the gold price is measured in US dollars, so absent any increase in demand for gold, the gold price will continue to fall under a rising US dollar. 

 

Economics

  • The wage price index was in line with expectations, up 0.60% for the third quarter. But the rise wasn’t enough, with the annual wage growth rate remaining at its record low (since 1998). By state, wages fell in every state, except in NSW.
     
  • Demand for home loans fell in August, slipping more than expectations. The number of home loans granted fell, whilst the total housing finance by value rose in August (largely as a result of investor lending).
     
  • Australian residential property prices lifted 1.5% across eight capital cities in the quarter (September end), but growth varied greatly. The rise puts the annual pace at a strong 9.1%.
     
  • Business conditions jumped by a record amount in October, hitting their highest level since early 2008 on the back of a strong start to the fourth quarter. However, business confidence continued to fall as firms remain uncertain about near-term demand.
     
  • The recent monetary policy moves from Japan could see capital flows seeking more attractive yields in Australia, which could result in a stronger local currency than real economic fundamentals would imply.
     
  • The US economy added 214,000 jobs in October, below market estimates. August and September reports were revised upwards, with the unemployment rate falling to 5.8% from 5.9%. Wages were up slightly for the month.
     
  • In China, the trade surplus rose from US$31bn to US$45bn in October. Exports were up 11.6% over the year with imports up 4.6%. This shows export markets (ie. global demand) are recovering.
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Politics

  • Wealthy Chinese people seeking residency in Australia will be required to inject money into venture capital funds under proposed changes to visa rules. The move is aimed to stop users of the Significant Investor Visa from parking money in low-risk bonds, thus forcing them to invest in ventures which will support the Australian economy and industries.
     
  • Prime Minister Tony Abbott backed President Obama’s claims that the Chinese proposed Asian infrastructure development bank risked undermining the international order. The bank, as proposed, would be controlled by China, rather than control being spread across member nations. PM Abbott also cited inadequate governance, security and transparency arrangements.
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