27 Sep 2019
Heightened political risks sees weaker investor sentiment
- Local and global equity markets trended lower this week with investor sentiment impacted by political events including Trump impeachment calls, negative trade talk, and Boris Johnson’s populist address to a reconvened parliament.
- In local stock news, Sydney Airport reported domestic passenger numbers down 1.3% in August whilst international numbers were up 2%. Domestic numbers reflective of a weakening economy. The company flagged strong arrival numbers from the US and India.
- Premier Investments bucked the poor retail environment reporting a surge in net profit after tax and a more than 7% rise in revenue. Good retailers can make money in any environment. Problem is good retailers are few and far between.
- National Australia Bank announced that newly appointed CEO Ross McEwan will start in his new role earlier than previously expected. McEwan is held in high regard. Current interim CEO Philip Chronican will replace Ken Henry as chair.
- The number of Australian job vacancies fell almost 2% over the 3 months to August, with data weakening from the previous quarter. The data could point to higher unemployment rate ahead.
- US employment in the services sector shrank for the first time in 9 years in September. However, data also showed manufacturing activity rose in September, beating expectations.
- Speeches from members of the US central bank rate setting committee provided insights into their concerns which centred on the manufacturing slowdown and pre-emptive support for the US consumer in light of weakening sentiment.
- A key US consumer confidence reading fell in September to a 3 month low, coming in below economist forecasts. Consumer confidence remains high, but the recent fall is one to watch.
- The US central bank has started to regularly intervene into the short-term funding markets to keep their cash rate within the target range. The required moves spooked some investors as the market generally sits in equilibrium near the cash rate. A shortage of available US dollars was the likely cause, with possible further confirmation that the central bank went too far in reducing its balance sheet over the last couple of years.
- Eurozone business activity readings were dismal across the currency bloc deepening fears of an impending recession. The European central bank chief said the data justified the bank’s recent move to indefinite stimulus, but reiterated his call on governments to step up their fiscal efforts.
- US Democratic House Speaker Nancy Pelosi announced a formal impeachment inquiry into President Trump. The Democrats have wanted to launch impeachment proceedings for some time on a raft of issues but were reluctant to do so for fear of furthering voter support for Trump. The announcement seems to have been strategically timed.
- US-China trade talks were held in Washington with US President Trump indicating he wanted a complete trade deal, not just concessions. The talks were described as being constructive and productive, which was in stark contrast to President Trump’s blustering trade speech at the UN.
- The chief European Union Brexit negotiator said talks with the UK appear to have gone backwards after EU officials received documents from UK PM Johnson outlining ideas for a new deal.
- The UK Supreme Court ruled PM Johnson acted unlawfully in advising the Queen to suspend parliament. The UK speaker of the house then recalled parliament whilst the PM was abroad, forcing him to cut short his travels. The PM’s subsequent address of parliament was poorly received by most.
- The US imposed more sanctions on Iran, this time penalising their central bank. President Trump also ordered more troops to the Gulf region to strengthen Saudi Arabia’s air and missile defences. The UK, Germany, and France joined other countries in formally declaring Iran responsible for the Saudi attacks.
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