29 Sep 2017
Political news and events dominate headlines
Markets
- Equity markets were mixed this week, driven by mostly local factors in each market.
- The local market finished lower, whilst the US market finished higher, buoyed by the potential for US tax cuts as plans of a proposal were leaked.
- In local stock news, Sydney Airport has appointed a new CEO following long-time boss Kerrie Mather’s resignation earlier this year. Geoff Culbert, most recently CEO of GE Australia, NZ, and PNG, will commence in the role in January.
- Commodity prices are under pressure again following moves from China to dampen speculative activity and to improve air quality (ie. smelting iron ore).
- The Aussie dollar fell this week as the US dollar rose following the US central bank chair’s hawkish speech. Falling commodity prices also put downward pressure on the Aussie dollar.
Economics
- A new survey from UBS has shown that about 1/3rd of Australians were not completely truthful on their home loan application over the last 12 months, marking a significant increase on the previous year’s survey. Alarmingly, 46% of respondents said it was easier to get a mortgage approved this year than in previous years.
- US central bank Chairwoman Janet Yellen acknowledged that the bank may have misjudged the strength of the labour market, long-run inflation expectations, and possibly even the forces driving inflation. She felt it prudent to move rates higher now rather than waiting for inflation to be higher.
- French economic data continues to improve, with economic growth up 0.5% on the previous quarter, strongly supported by higher consumer spending. In addition, corporate profit margins increased as did services and manufacturing activity, which increased to their highest levels since May 2011. Positive sentiment following Macron’s rise to power continues.
Politics
- The Turnbull government has given the east coast gas giants one last chance to free up enough fuel for the domestic market or be hit with export controls. The threat follows 2 new reports which showed that the predicted shortfall to be 3 times worse than originally thought. The government is also aiming to convince NSW, VIC, and NT, to drop their opposition to onshore gas extraction.
- The incumbent National Party in NZ secured the biggest share of the vote in the NZ federal election, though still fell short of an absolute majority. They will need the support of the nationalist NZ First Party to govern.
- Angela Merkel faces her toughest task to forge a new coalition, her 4thterm in power, after her conservative bloc posted its worst result of her 12 years as German Chancellor. The surprise was the surge in the vote for the far-right anti-immigration party. It looks likely Merkel will form a coalition with 2 new partners.
- China has announced it will limit oil exports to North Korea under UN sanctions over its nuclear and missile development. China will also ban textile imports from North Korea – one of their last major sources of revenue following Chinese bans on importing coal, iron ore, seafood, and other goods. China accounts for nearly 90% of North Korea’s trade.
- North Korea’s foreign minister has stated that “since the US declared war on our country, we have every right to take countermeasures, including the right to shoot down the US strategic bombers even when they are not yet inside the airspace border of our country”. Rumours are that North Korea wants to test a hydrogen bomb next as a show of power.
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