20 Jul 2018
Equity markets higher as U.S corporate earnings surge ahead
Markets
- Local and global equity markets were mostly higher with the exception of Asia, which was impacted by weaker than expected economic data and continuing concerns regarding trade wars.
- US 2nd quarter company reporting season is looking to be a strong one with analysts forecasting a 21% increase in earnings from a year ago. Of the companies to report so far, 86% have topped expectations.
- In local stock news, Rio Tinto announced it had agreed to sell its interest in the world’s 2nd biggest copper mine for US$3.5bn.
- Rio also announced that sales from the Pilbara rose 14% in the June quarter and that total 2018 iron ore shipments will be at the upper end of previous guidance. Mined copper production rose 26% in the quarter.
- BHP said its iron ore output rose 3% in the June quarter, coming in above market expectations, as the company set its 2019 financial year target slightly higher.
- Ramsay Healthcare’s 51% owned French subsidiary has announced a takeover bid to acquire Swedish healthcare company Capio AB for $1.04bn. Capio operates in 5 European countries, with market leading positions in Sweden, Norway, Denmark, and France.
- A report stated that the Trump administration is actively considering tapping the US’s emergency supply of crude oil as political pressure grows to reign in rising gasoline prices ahead of congressional elections in November.
- Oil prices fell sharply during the week as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.
Economics
- A key US consumer sentiment index printed a 6 month low indicating negative sentiment, with those surveyed citing escalating trade tensions as their main concern.
- US retail sales rose 0.5% in June as expected, but the market took a greater liking to the revised May figure which came in at 1.3% and is the largest rise since September 2017.
- A prominent US central bank president has said that a flat US yield curve means interest rates are close to neutral, suggesting that there is little reason to raise rates much further.
- US housing starts fell over 12% in June to a 9 month low as homebuilders struggled with higher lumber prices and persistent land and labour shortages.
- China’s economy grew 6.7% in the 2nd quarter, down slightly from 6.8% in Q1, but in line with market expectations.
- China’s imports of Australian goods were up by 12% on an annual basis.
- Data showed China’s trade surplus with the US swelled to a record in June, which could further inflame President Trump. China’s aluminium exports exceeded half a million tonnes for the 2nd time ever in June, while steel exports hit an 11 month high.
- China’s iron ore imports fell over 11% in June, which resulted in 1st half imports being down 1.6% on the same time last year.
- A range of other Chinese data, including retail sales, industrial output, and fixed asset investment, showed the economy continues to grow strongly, but most came in below market expectations.
Politics
- The US Treasury Secretary said the US and China could reopen trade talks if the Chinese government was willing to make significant changes.
- Officials from the EU Trade Commission, due in Washington next week for trade talks, are said to be preparing a list of retaliatory actions in response to proposed US tariffs on EU cars.
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