13 Dec 2019
Investor sentiment buoyed by reports of trade deal
- Local and global equity markets pushed higher this week as news of an in-principle US-China trade deal came through, whilst early indications of a Conservatives victory in the UK election boosted investor sentiment.
- In local stock news, A2 Milk’s share price fell after the firm announced the CEO was stepping down after less than 18 months in the role. The departing CEO cited significant travel as the reason for stepping down.
- Real estate company Charter Hall upgraded its guidance whilst announcing the acquisition of $1.25bn in property across the group. The purchases include a 49% interest in 225 BP petrol stations and the Arnott’s factory in Western Sydney that will be leased back to Arnott’s.
- Oil cartel OPEC and its allies agreed to extend output cuts through 2020 pushing oil prices higher.
- The Aussie dollar pushed higher this week as the US central bank chair indicated that the conditions for considering high rates were a long way off, putting downward pressure on the US dollar.
- Australian business confidence fell amid flat conditions in November, according to a key survey, which also showed business conditions were unchanged. Employment growth will remain weak as a result, putting further pressure on economic growth and the RBA.
- Australian consumer confidence slipped in December, with concerns about job losses rising to a 2 ½ year high, according to a key survey. There was also an increase in consumer thriftiness, with a greater number preferring to pay off debt and keep savings at the bank.
- The US central bank decided to leave rates unchanged at 1.50-1.75% and signalled that current settings are likely to remain in place for some time. The bank expects moderate economic growth and low unemployment to continue through 2020.
- The US economy added 266,000 jobs in November, stemming recent concerns of a slow-down in jobs growth. The increase was the largest in 10 months, pushing the unemployment rate down to 3.5%.
- US consumer sentiment rose to a 7 month high, coming in above expectations. Consumer borrowing also accelerated at the 2nd fastest pace this year.
- The European central bank kept its rates steady as new President Christina Lagarde oversaw her first meeting in charge. She cited that she’s neither hawkish (rates higher) or dovish (rates lower), but wants to heal recent rifts within the bank.
- Germany’s industrial output fell significantly more than expectations. Production came in well below consensus forecasts. The German government is running out of time to help the economy.
- UK economic growth grew at its slowest annual pace in almost 7 years, with Brexit concerns continuing to take a toll. Services slowed, whilst manufacturing, construction, and agriculture all shrank. The biggest decline came in construction.
- Chinese exports dropped in November for the 4th consecutive month, but imports grew suggesting that the government and central bank stimulus efforts are helping to support local demand.
- Chinese producer prices fell for a 5th straight month. Producers are unable to pass on tariff-caused price increases due to the weak consumer and retail sentiment.
- Reports that the US has reached a deal in principle with China to resolve the trade war helped boost market sentiment. Also reported was that the US government had offered to cancel tariffs set to take effect on Chinese goods on 15 December.
- The US White House and the Democrats have reached an agreement on a revised US-Mexico-Canada trade deal after months of negotiations. The agreement came less than an hour after the Democrats unveiled articles of impeachment against President Trump.
- The UK has voted, with exit polls showing a likely landslide win for the Boris Johnson led Conservatives. If polls are correct, Brexit looks likely to take place early next year.
- Prime Minister Scott Morrison faced his first major public backlash since the election, coming under pressure from within his own party, both at the federal and state level, and from those on the frontline fighting bush fires, citing his inaction on recognising climate change and doing anything about it. Level 2 water restrictions in Sydney and 6 months’ worth of rain in Brisbane didn’t help his cause.
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