21 Apr 2017
Rising geo-political tensions halt equity markets
Markets
- Equity markets were mixed with US and Japanese markets higher, whilst European and other Asian markets were lower.
- The local market finished lower with investors concerned about falling commodity prices and geo-political tensions in the Pacific.
- The Chinese equity market continued to fall as investor worries deepened that tighter regulations against speculation and shadow banking will hurt the country’s recovery.
- In local stock news, Telstra’s share price continued to fall as concerns mounted regarding increasing competition and sustainability of their dividend. The market appears to have overreacted based on the information at hand.
- Construction group CIMIC reported a solid 1st quarter result with a 23% increase in net profit after tax. The result was helped by continued growth in revenues and the contribution from the recent UGL acquisition.
- Tabcorp has taken steps to appease the competition regulator in their planned takeover of Tatts Group by conditionally selling their Qld based pokies monitoring business that they acquired last year. Tatts also reaffirmed their backing for a tie-up with Tabcorp in light of a fresh competing bid.
- Brambles provided a 3rd quarter trading update with group sales growth of 5% and no changes to earnings guidance. The stock price pushed higher as the market realised it had previously overreacted.
- The oil price fell this week on reports of rising US shale rig counts and rising US supply.
Economics
- The Reserve Bank of Australia’s minutes showed they are quite concerned regarding developments in the labour and housing markets, with indications they will be closely monitoring data over the next few
- US economic data was softer this week with manufacturing and home-builder sentiment readings falling from 2 and 11 year highs respectively. March retail sales were also softer whilst consumer prices fell for the first time in over year.
- China’s economy grew at a rate of 6.9% in the March quarter, beating market estimates and coming in above the government’s 6.5% target for the year. Key components of fixed asset investment (construction), retail sales, and industrial production all showed positive trends.
Politics
- Geo-political tensions escalated due to North Korea’s failed missile launch, as the US mobilised more fleets into key positions.
- First round of the French presidential elections plays out this weekend. Far right leader Le Pen is currently neck and neck with centrist leader Macron. Reports are that a large percentage of voters are still undecided and a large amount may abstain.
- UK PM Theresa May has called for a snap election on 8th June, as a way to strengthen her Brexit hand, 3 years prior to the next scheduled elections. At present, the Conservatives have a slim majority, which will likely hamper her ability to get things done over the next 2 years.
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