26 Oct 2018
Equity markets fall on culmination of fears
- Equity markets fell this week on a culmination of fears relating to diplomatic tensions with Saudi Arabia, Italy’s finances, and continuing trade war fears. High flying sectors like US tech stocks were hardest hit.
- Trading was chopping with the US tech-heavy NASDAQ index suffering its biggest 1 day fall since 2011 before seeing the biggest one day gain in the index since earlier this year. The rebound was helped by a strong result from Microsoft.
- In local stock news, Flight Centre shares fell sharply after the company flagged a lower first half profit from its Australian business.
- Brambles 1st quarter sales were up 6%, boosted by strong numbers out of Europe.
- Healthscope has received an unsolicited takeover proposal from a consortium comprised of private equity and Australian Super. The proposal is largely the same as the company received and knocked back earlier this year.
- Energy retailers came under pressure this week after the Government tasked the energy regulator with developing default market offers for residential and small business electricity customers in NSW, VIC, QLD, and SA. Governments setting market prices has never been a good idea.
- JB Hi-Fi reconfirmed they are on track to meet their guidance of total sales of around $7.1bn, up from $6.9bn in the prior financial year. Total sales financial year to date are up 5.3%.
- ResMed posted strong quarterly result during US reporting season. Top line revenue was up 12%, underpinned by strong sales in both America and Europe. Margins actually expanded by nearly 3%.
- Oil prices fell after Saudi Arabia pledged to raise its crude production to a record. No doubt President Trump will be using the Saudi’s killing of a journalist and upcoming sanctions on Iran to pressure the Saudi’s to raise production to bring down oil prices.
- Credit rating agency Moody’s changed its outlook on the US retail industry to positive for the first time since 2015, buoyed by optimism surrounding the economy and benefits from retailers’ online investments.
- US existing home sales fell by the most in 2 years in September. Home sales have now fallen for 6 straight months, with rising mortgage rates expected to slow demand. However, median sales prices are 4.2% higher than a year ago.
- US new home sales also fell in September, coming in at the slowest pace since December 2016.
- The European central bank left interest rates at 0%, with the market continuing to expect no rate rises before the 2nd half of 2019. The bank reiterated that their asset purchase (money printing) program will continue to the end of December, after which they expect to stop buying.
- China’s economy grew at 6.5% in the 3rd quarter, coming in slightly under forecasts. The pace of growth remains strong as the government pledges more support for the economy.
- Other Chinese data was mixed, with industrial production missing expectations, whilst retail sales and fixed asset investment came in above expectations.
- The Coalition lost the seat of Wentworth to Independent Dr Kerryn Phelps with the Government now set for minority rule, making it increasingly difficult for them to get anything through parliament between now and the next election. The swing against them was large.
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