27 Jul 2018
Trade wars take a 'positive' turn
Markets
- Local and global stock markets finished higher this week as investors took a liking to the trade negotiations between the US and Europe.
- US corporate reporting season continued strongly this week with 85% of companies topping analyst expectations thus far.
- Facebook Inc saw their share price fall as much as 24%, $120bn in value, as they reported 3 million less users and less user activity, guiding for lower revenues ahead. The privacy scandal is taking its toll.
- In local stock news, Wesfarmers announced they are planning to retain a 15% stake in Coles and 50% stake in Flybuys when they eventually demerge. The also indicated Coles will carry approximately $2bn of debt and have a dividend payout ratio of 80-90%.
- Macquarie Group announced that current CEO Nicholas Moore will be succeeded by Shemara Wikramanayake, who is currently head of Macquarie’s largest division. An excellent appointment.
- Nine Entertainment will acquire Fairfax Media in a $2.2bn cash and shares deal to create a $4bn media giant
Economics
- US existing home sales unexpectedly fell in June and posted their 3rd consecutive monthly decline. May’s sales growth was also revised down. The median house price increased from 5.2% from a year ago to an all-time high of US$276,000 in June.
- A prominent US central bank president said the bank should suspend its rate hikes to try to avoid an outright inversion of the yield curve (when long term debt has a lower yield than short term debt), but added that senior bank officials should simply ignore President Trump’s criticism. Over the last few decades, an inverted yield curve has always led to a US recession.
Politics
- President Trump decided to take on both the Chinese and the US’s central bank this week, saying he was ready to impose tariffs on all $500bn of Chinese imports whilst criticising the US central bank for planning rate hikes.
- President Trump said that the US and the European Union (EU) had agreed to work toward eliminating tariffs on industrial goods and increasing US exports of LNG and soybeans to Europe. Interesting that all 3 sectors feature heavily in Trump’s voter base. Trump also agreed to refrain from imposing car tariffs while the two sides continued their negotiations.
- Reports that the EU had rejected proposals from the UK on how to govern the City of London’s access to the European market after Brexit and says that the UK PM’s financial services plan would rob the EU of its decision-making autonomy.
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