7 Jul 2017
Equity markets lower on North Korean escalation
Markets
- Equity markets locally and globally mostly finished lower on concerns regarding North Korean escalation and on the potential for less easy central bank policy.
- The recently jittery US tech heavy NASDAQ index sent some shivers through markets as a data mishap saw large price moves for Apple, Amazon, and other stocks appear on a range of very popular financial news websites.
- In local stock news, Fairfax Media’s share price fell after the company ended their discussions with private equity outfits and decided to proceed with the planned separate listing of their Domain business.
- Receivers have been appointed to Network Ten, whilst Bruce Gordon and Lachlan Murdoch have indicated potential interest in buying the stricken company. Their approach is problematic due to the government’s strict (somewhat archaic) media ownership laws.
- Flight Centre has finally provided an upgrade to guidance after five downgrades in three years. The company cited that revenue growth improved following a stabilisation in airfare pricing. The company is embarking on further cost reduction initiatives, including headcount reductions which have already begun.
- The Aussie dollar finished lower this week as investors saw more negative tones in the Reserve Bank of Australia’s interest rate decision.
Economics
- The Reserve Bank of Australia left the cash rate unchanged at 1.5% as expected. The bank’s statement following the decision continues to show a rather neutral stance, with the bank not in any rush to raise rates in light of high levels of household debt, subdued consumption growth, tighter lending standards from the bank regulator, and higher lending rates.
- The US central bank’s June meeting minutes showed officials readying plans to start gradually shrinking the bank’s balance sheet in the coming months. However, members remained divided on the pace and trajectory of rate rises in light of very tight labour market but still stubbornly low inflation.
- US private sector employers added 153,000 jobs in June, well below market expectations. This, together with a more hawkish (positive) fed, spooked markets.
- Other US economic data was mixed with consumer spending down and inflation falling further, whilst consumer sentiment was up and a Chicago business barometer was also up along with a broader manufacturing index recording its highest level since 2014.
- The minutes from the European Central Bank’s June meeting seem to confirm that the era of ultra-loose monetary policy is coming to an end.
Politics
- North Korea’s latest missile launch spoiled investors’ appetite for risk. The launch appeared to show a longer range than previously expected. South Korea retaliated with their own military manoeuvres and training exercises.
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