23 Mar 2018
Stocks fall as Trump targets China
Markets
- Stock prices fell this week after President Trump announced new tariffs and investment restrictions which will apply to China.
- Shares in Facebook fell sharply this week following a report of a data breach and potential misuse of user information. Other tech stocks also fell.
- In local stock news, Rio Tinto announced the sale of 2 Queensland coal projects to Glencore for $1.7bn.
- Crown Resorts shares fell after the surprise resignation of James Packer from the board.
- Myer reported a poor result which was in line with their previous guidance. The company wrote off close to half a billion dollars in goodwill. Astonishing the company was carrying that amount of goodwill. The debt load of the company is low, but the write down did push them closer to breaching some of their debt covenants which will have to be re-negotiated.
- The volatility in the big 4 banking stocks is rising as the company’s appear before the royal commission and as overseas funding costs begin to rise.
- Commodity prices remained volatile this week as global economic data continues to be mixed, investors look for a clearer demand story from China, and the threat of further trade tariffs remains.
Economics
- Australian residential property prices rose at an annual pace of 5% in the year to December, slower than the 8.3% growth achieved 3 months earlier. Prices rose 1% in the 4th quarter with Sydney and Darwin down and Melbourne and Perth up.
- The US central bank raised rates by 0.25% taking their Fed Funds Rate to 1.50-1.75%. The move had already been fully priced in by markets. The Fed governor’s comments seem to indicate that 4 rate rises this year is now a higher possibility given their positive outlook.
- US industrial production jumped 1.1% in February, the largest increase in 4 months, and well ahead of expectations. Manufacturing, construction, and the energy sector saw the biggest gains.
- A key US consumer sentiment survey hit a 14 year high in March, helped by tax cuts.
- US job openings increased to the highest level since the data series began in December 2000. The surge in openings was broad based, with 1/3rd coming from professional and business services.
- The Eurozone consumer price index came in below expectations at 1.1% in February versus a year earlier. The reading was the lowest since December 2016 and well below the European Central Bank’s target of 2%.
Politics
- President Trump unveiled a package of US$48bn in annual tariffs against China as well as restrictions on Chinese investments. The Chinese government has said it will protect itself. 45 US trade associations had urged Trump not to inflict the tariffs as they would be particularly harmful to US consumers and the economy.
- President Trump has gone a step further in cleaning house removing his national security adviser.
- Britain and the EU agreed to a transition period to avoid missing the Brexit deadline. The agreement was only reached after Britain accepted a potential solution for the border with the Republic of Ireland which may cause some issues domestically.
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