13 Sep 2019
Trade tensions fall on reciprocal olive branches
- Local and global equity markets moved higher this week on optimism that trade tensions could be easing and following the European central bank’s fresh round of stimulus.
- In local stock news, TPG Telecom and the competition regulator continue to battle their differences out, in court following the regulator’s refusal to allow a TPG / Vodafone Australia tie-up.
- Oil prices fell this week following the resignation President Trump’s national security adviser, which potentially opens the door for Trump easing sanctions on Iran.
- The value of loans granted to Australian housing investors and owner-occupiers jumped in July by almost 4%. The rise was supported by the federal election result and by the banking regulator’s easing of loan serviceability standards.
- US jobs data was mixed, with jobs growth slowing more than expected in August, but wage growth continues to rise, further supporting consumer spending.
- US consumer prices were higher in August following a strong rise in July. Core inflation is now up 2.4% over the last 12 months, which is the fastest pace in more than a year.
- Eurozone economic growth halved in the 2nd quarter as expected, whist employment rose in the 2nd quarter.
- The European central bank launched a new round of stimulus measures, cutting the cash rate further into negative territory (minus 0.50%) and starting a new bond-buying program of 20bn Euros a month for as long as necessary. The move was expected, but the amount of stimulus disappointed.
- German industrial production fell in July against expectations of a rise, with the German economy most likely already in recession. Germany’s finance minister suggested a stimulus package would be forthcoming if required to fight a recession.
- China’s central bank has cut the amount of cash that banks must hold as reserves, boosting liquidity (US$126bn) to shore up the economy.
- Chinese trade data for August showed exports decreasing by 1% (worse than expected) from a year earlier and imports declining 5.6% (better than expected). Shipments to the US fell 16% from a year earlier.
- China’s iron ore imports rose again in August to a 19 month high, up 4.2%. Other data showed iron ore imports rebounding 21% in July.
- British politics failed to show any signs of improvement with the bill to stop a no-deal Brexit getting royal ascent. PM Boris Johnson failing for a 2nd time to trigger a snap election, legal challenges ongoing to stop the PM from suspending parliament for 5 weeks, and freedom of information requests for the PM and his colleagues emails and private messages leading into his decision to suspend parliament on suspicions of conspiracy.
- The US Treasury Secretary has said that China and the US have conceptual agreement on enforcement mechanisms around intellectual property theft. If true, and actually signed, it would be a big step forward.
- China announced tariff exemptions for a basket of US goods. The move was seen by many as a show of good faith given, they have the next round of negotiations coming up soon.
- President Trump has unexpectedly forced out his national security adviser John Bolton. Trump fired him whilst Bolton resigned the night before he was fired. The action seems to stem from Bolton’s opposition to Trump meeting with the Iranian President to potentially broker a deal.
- President Trump has called on the US central bank to slash interest rates into negative territory. The request is obviously politically motivated – lower rates extends the equity market rally which increases his chance of re-election; lower rates also gives him a buffer to go harder at China and extend his trade and technology war.
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