15 Sep 2017
Equity markets push higher as North Korean fears subside
Markets
• The local equity market finished flat for the week after weaker than expected Chinese economic data wiped out gains from earlier in the week.
• The Chinese data had mixed effects on Asian markets, with Japan and India still finishing higher for the week.
• US and European markets also finished higher with the UK being the exception after their central bank mentioned that an interest rate rise might be near. The comments put upward pressure on the British Pound.
• Australia’s financial sector regulator has appointed 3 panel members to inquire into Commonwealth Bank’s governance, culture, and accountability, following the civil lawsuit filed by the Federal government’s financial intelligence unit.
• Macquarie Group has provided an upbeat assessment of income in its first half, helped by stronger performance fees. Their first half result is expected to be up on the 1st half last year and the same as the 2nd half.
• Tabcorp expects to complete its $11bn merger with Tatts on November 1. The merger is expected to deliver at least $210m in annual earnings from synergies and business improvements.
• QBE insurance boss John Neal will step down at the end of the year after 5 years in the role. The group’s former CFO, Pat Regan, will be his replacement. He currently leads their Australian & NZ operations.
• The oil price pushed higher this week following reports from Saudi Arabia that they will cut crude oil allocations to its customers worldwide in October. There were also concerns regarding US supply interruptions given the effects of hurricane activity in the Gulf.
Economics
• Australian business conditions have climbed to their highest level since early 2008 with a marked improvement in employment intentions boosting the outlook for further jobs growth. However, business confidence took a big hit in August to move to 2 year lows.
• Australian consumer sentiment bounced in September as worries over family finances offset optimism about the economic outlook. The reading remained weak, with pessimists still outnumbering optimists.
• The Australian unemployment rate remained steady at 5.6% in August which was in line with expectations. New jobs jumped more than expected and the participation rate also increased, both showing strengthening labour market conditions.
• Chinese consumer price inflation rose more than expected to a 7 month high and was the first time the measure had accelerated in 3 months.
• Markets are currently pricing in just a 34% chance of a December US interest rate hike. Markets are betting the US Fed will leave rates alone for the remainder of this year and instead focus their efforts on reducing the size of the bank’s balance sheet (ie. reversing quantitative easing).
• UK inflation rose strongly in August to reach the highest level since the Brexit referendum. This pushed the Bank of England to comment that rate rises might need to occur sooner than expected.
Politics
• North Korean / US tensions appear to have stabilised, for now, with the UN Security Council approving fresh trade sanctions against North Korea.
