21 Sep 2018
Trade wars escalate yet again
- Equity markets finished higher this week even, in light of escalating trade wars between the US and China, as the rate of tariffs announced came in much lower than expected (10% instead of 20-25%).
- In local stock news, aged care stocks came under strong selling pressure after PM Morrison announced a royal commission into the sector.
- TPG Telecom reported a 4.6% drop in full year profit after the NBN hit broadband margins and home phone revenue. The company flagged further profit headwinds from the NBN in the current financial year.
- Sydney Airport reported total August traffic of 3.8%, with a strong increase in international passengers (nearly 5%) thus far in calendar year 2018.
- Rio Tinto have announced a share buy-back of up to $4.2bn. The capital management was expected after Rio announced smaller increase in their dividend than the market expected during reporting season, following the sale of some assets.
- Oil prices rose this week on signs OPEC would not be prepared to raise output to address shrinking supplies from Iran, in light of US sanctions. At the same time, US crude oil inventories are at their lowest level since February 2015.
- US retail sales came in well under market expectations in August, with the smallest rise since February. On the same time last year, retail sales are up 6.6%.
- Americans remain optimistic on employment and wages with a key sentiment index hitting its second strongest level since 2004.
- Eurozone inflation slowed slightly to 2% in August. A reasonable level of inflation but nowhere near high enough to force the European Central Bank to change course on policy which remains highly stimulative.
- European central bank President Draghi warned that banks in the Eurozone should reduce their stock of non-performing loans further to boost lending and improve profitability. The European banking sector has come under renewed pressure more recently due to their exposure to Turkey.
- Chinese fixed asset investment growth continued to slow as expected as the economy transitions. In other data, industrial output rose more than 6% on the same time last year whilst retail sales grew 9% in August.
- The US government has indicated that they are prepared to take the very strong action against countries not complying with their sanctions on Iran, one of which includes cutting purchases of Iranian oil to zero. The US has told India and other countries to cut oil imports from Iran to zero by 4th November or face US sanctions themselves.
- President Trump has instructed his aides to proceed with tariffs on about US$200bn more in Chinese products. China has promised to respond with tariffs on US$60bn worth of US goods. This would mean that up to 95% of American imports coming into China would be subject to tariffs.
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