18 May 2018
Oil price hits three and a half year highs
Markets
- Local, Asian, and US markets finished lower this week, whilst Japanese and European markets finished higher.
- The yield on 10-year US government bonds jumped to its highest level since July 2011, suggesting the market thinks inflation will tick-up further, thus putting further pressure in the US central bank to raise rates.
- In local stock news, Telstra’s share price fell after the company issued weaker than expected earnings guidance. Whilst the guidance wasn’t materially weaker, investors focused on concerns regarding mobile competition which appears to be intensifying. The company said it added 36,000 internet subscribers and that it had an NBN market share of 50%.
- Telstra’s listed competitors also saw their share prices fall, with the market believing the competitive pressures will hit smaller operators just as much.
- Myer’s share price rose after it reported a 3.1% drop in 3rd quarter sales, versus the same time last year, which was a slight improvement on the 2nd quarter fall. The result pushed other retail stocks higher.
- A further 3 board members of AMP Limited resigned prior to the company’s annual general meeting (AGM), with one still holding out. The AGM was a fiery affair, with shareholders voting against the executive’s remuneration report. One more shareholder vote against the company would force a full board spill.
- Trade concerns and unrest in the Middle East sent oil prices to their highest level in 3.5 years.
Economics
- The minutes of the Reserve Bank of Australia’s May board meeting continued to emphasise concerns regarding weak wage growth and weak consumer spending.
- March quarter data showed Australian wages experiencing weaker than expected growth.
- Australian employment data for April showed a slight rise in the unemployment rate to 5.6%, with a better than expected 22,600 jobs created, which was overwhelmed by more people looking for work.
- Core retail sales in the US rose at a faster than expected pace in April, as consumer spending picked up following the 1st quarter slowdown.
Politics
- The US has confirmed that President Trump will meet with the North Korean leader in Singapore on June 12 for talks on its nuclear weapons programme.
- However, the North Koreans abruptly called off their talks with South Korea, potentially throwing the US-North Korean summit into doubt.
- President Trump changed tact in his previous attack on China’s ZTE Corp potentially indicating easing US-China trade tensions. Trump vowed to help ZTE “get back into business, fast” nearly a month after his own Commerce Department implemented a ban on US companies selling to the company.
- The US ambassador to China said the two countries remain very far apart regarding a tariff resolution, though the White House indicated they remain committed to reaching an agreement.
- The far-right and far-left populist parties in Italy are attempting to form government, a move most considered the worst case scenario regarding impact on markets and future Eurozone integration. Both are anti-European Union. Reports suggest they have already asked the European Central Bank to forgive 250 billion euros of Italian debt.
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