20 Dec 2019
Xmas rally spurred by trade deal confirmation
- Local and global equity markets pushed higher this week, with investors gaining further comfort from greater detail on the US-China trade deal and the UK election result.
- In local stock news, Woolworths has been given the green light to restructure its $10bn hotels, liquor, and gaming businesses ahead of a planned demerger and likely spin-off in late 2020.
- The banking regulator has requested Westpac set aside an extra $500m of capital as it prepares to investigate the anti-money laundering fiasco. APRA made the same request of CBA when they went through the same issues in 2018.
- Oil prices moved higher this week, getting a boost from the US-China trade deal, which may lead to greater economic activity and hence demand.
- Australian mortgage lending expanded in October, with borrowing activity by owner-occupiers continuing to outpace that of investors. The value of new loans to owner-occupiers has risen by 5.7% over the last 12 months whilst there has been an almost 10% fall in value in new loans to investors.
- The number of jobs advertised online fell 1.3% in November to make it 11 consecutive months of declines. Online job ads are now down more than 10% over the past 12 months.
- A surge in part-time work leading into the holiday period has helped the unemployment rate fall to 5.2% in November. Only 4,200 new full-time jobs were added in November, whilst 19,000 jobs in total were lost in October.
- US housing starts increased more than expected in November, and building permits rose to the highest level since May 2007. Manufacturing output also picked up more than expected in November.
- Growth in China’s industrial and retail sectors beat expectations in November, boosted by fiscal support from the government. However, growth in infrastructure and the property sector remained lacklustre in November.
- Federal Treasurer Josh Frydenberg blamed the smaller than expected budget surplus on the drought and international trade tensions. He went on to say that the government’s main commitment is to pay down debt (we already have the lowest debt levels in the developed world) and that $4.2bn worth of infrastructure projects would somehow save the economy (when hundreds of billions of dollars of infrastructure is required).
- The US House of Representatives voted to impeachment President Trump. In true Trump fashion, he held a rally in Michigan on the same day, which was his longest ever. Two Democrats voted against impeachment, whilst the rest of the House followed party lines. Republican Senate leader Mitch McConnell has already made clear Republicans will be voting against impeachment in the Republican controlled Senate.
- The UK election result largely followed the polls with the Conservatives winning with a large majority. Labour leader Jeremy Corbyn has resigned as expected. Brexit should now take place early next year, absent any changes to the agreement which received support earlier this year.
- The US Treasury Secretary said an initial US-China trade deal would be signed in early January. He also confirmed that the agreement had been put on paper and translated, and would not be subject to renegotiation. New tariffs set to come into place have been shelved and there may even be movement on winding back some of the existing tariffs.
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