14 Sep 2018
Strong US economic data puts upward pressure on rates
Markets
- Equity markets were mostly higher this week, supported by the US and Europe, however Asian markets were mixed as trade concerns remained.
- Apple Inc has reported than some of its products could be exposed to President Trump’s proposed tariffs on US$200bn worth of Chinese imports.
- In local stock news, National Australia Bank’s share price came under pressure after the bank decided not to hike its mortgage rates despite its rivals doing so, thus sacrificing margins.
- APA Group rallied after Australia’s competition regulator gave its nod of approval to Hong Kong’s CK Infrastructure Holdings for a near $13bn takeover of the gas pipeline operator. Expectations are that the Foreign Investment Review Board won’t oppose the deal, but that the Federal Treasurer might oppose on national interest grounds. Not an easy decision to make.
- Sydney Airport will receive $170m in compensation after the NSW government announced it would spend up to $2.6bn building a new motorway connecting the airport to the WestConnex toll road, paying the airport for using its land. Sydney Airport has indicated it will use the funds to improve rail and bus services
- The Australian unemployment rate remained unchanged at 5.3%, with the number of people employed rising by 44,000, coming in above expectations. The workforce participation rate also rose.
- Weak July housing loans data sparked fears of a further slowdown in the property market. Lending to investors in property declined for the 5th straight month, hitting a 5 year trough.
- Political turmoil and recent rate rises by the banks has hit consumer confidence with a key consumer sentiment index falling sharply in September, hitting the weakest reading since November 2017.
- The US Labour Department’s employment report showed accelerating job growth and a surge in wage growth. The report raised concerns with investors that the US central bank might be a little behind in their policy normalisation process.
- US small business optimism surged to a record in August as President Trump’s tax cuts and deregulation initiatives led to more sales, hiring and investment.
- US job openings surged to record high in July and more Americans voluntarily quit their jobs, pointing to sustained labour market strength and confidence.
- A key German survey of economic expectations rose slightly in August for the 2nd straight month despite some concerns over Turkey and Argentina.
- Chinese inflation accelerated to a higher than expected 2.3% in August.
- Local politics remains toxic with news of Malcolm Turnbull meddling with the by-election for his previously held seat and also apparently personally involving himself with ongoing issues surrounding Peter Dutton’s ongoing parliamentary eligibility. Even ex-PM John Howard got in on the Wentworth pre-selection battle. Looks like Howard and Turnbull’s preferred candidate won out over PM Morrison’s preferred.
- President Trump said he had tariffs to impose on an additional US$267bn worth of Chinese imports, on top of the proposed US$200bn. China has indicated they will respond if Washington takes any new steps on trade.
- China has told the World Trade Organisation it wants to impose sanctions on the US for its non-compliance with the ruling in a dispute over US dumping duties.
- The European Commission president said that the EU stands ready to work day and night to find an agreement with the UK over Brexit. However, there were reports that proponents of a hard Brexit may force the UK Prime Minister to stand down because they oppose her softer Brexit plan.
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