30 Aug 2019
Stocks move higher on softer trade war rhetoric
- Local and global equity markets finished higher this week as trade war rhetoric began to soften and expectations of near term US central bank rate cuts rose.
- In local stock news, Wesfarmers produced a reasonable result, with Bunnings, Officeworks and the Industrials divisions the highlights. Kmart and Target continued to struggle.
- Boral’s share price fell sharply after the company reported a reasonable result but flagged a poorer outlook, whilst announcing plans to expand its plasterboard exposure.
- Macquarie Group has announced a $1bn capital raising in order to assist in meeting increased capital requirements and assist in funding significant new investments in renewable energy. The raising was well received.
- Woolworths posted an impressive result with the CEO saying that sales have jumped sharply in the first 8 weeks of the new financial year, no doubt buoyed by the Lion King Ooshies collectables program, with same store sales up more than 7%.
- Economists are revising down their Australian economic growth forecasts after construction data showed building work fell more than expected in the June quarter. The total value of work fell almost 4% on the previous quarter, and more than 11% on the same time last year.
- The US central bank chairman’s much anticipated speech at Jackson Hole did not provide any specific direction to future interest rate settings, but he was clear the bank would act as appropriate to keep the current economic expansion on track.
- New orders for US made capital goods rose modestly in July, however, shipments fell by the most in nearly 3 years, pointing to further signs the Fed will need to cut rates.
- Germany’s economic growth contracted in the 2nd quarter, with exports falling more strongly than imports and construction investment also falling.
- A key German business climate index fell to its lowest level since November 2012.
- The Chinese government is considering relaxing and removing restrictions on auto purchases as part of a broad move to boost consumption. The government will also encourage credit support for purchases of new energy efficient vehicles and smart home appliances.
- US-China relations worsened after China announced its own retaliatory measures, imposing additional tariffs on thousands of US products effective 1st September, with President Trump then demanding American companies seek alternatives to doing business with China. He then toned down some of the rhetoric stating he thought China genuinely wanted to reach a deal.
- President Trump went after the US central bank chair, which he appointed, asking whether the chair was a greater enemy to the US than China’s leader.
- Iran has said it will scale back compliance with a landmark 2015 nuclear pact that President Trump tore apart, unless the Europeans find a solution enabling Iran to sell its oil despite US sanctions. The Europeans still remain in favour of the pact. The Iranian economy is dead without oil sales.
- Britain PM Boris Johnson called everyone’s bluff, deciding to suspend Britain’s parliament for more than a month before Brexit. The move to possibly force through Brexit with or without deal might backfire as it increases the chances of him facing a vote of no-confidence in his government, and hence an early election.
- Italian political news seemed to be moving in the right direction with a potential tie-up between the opposition Democratic Party and the in-power 5-Star Movement. Both parties have been enemies previously, such is the state of current Italian politics.
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