24 Jan 2025
Trump bolsters investor optimism
Markets
- Local and global equity markets moved higher this week, buoyed by Donald Trump’s inauguration and a raft of executive orders.
- Ernst & Young’s Australian CEO survey showed 83% of the sixty respondents were optimistic about the economic outlook over the coming year, compared to 60% in September, with two thirds planning to pursue M&A opportunities in the next twelve months.
- In local stock news, Rio Tinto shares fell after a report indicated the mining giant had held early-stage merger talks with Glencore, which would create a company worth more than $250 billion and surpass BHP as the world’s biggest miner.
- BHP’s copper output surged 17% in its second quarter in contrast to iron ore which was largely unchanged amid softening demand.
- Insignia Financial shares rose again as the bidding war for them heated up with CC Capital Partners raising its offer to $4.60 a share or $3 billion.
- Wesfarmers shares rose after the company said it would close down its money losing e-commerce business Catch.com.au. Wesfarmers purchased Catch for $230 million in 2019.
- Shares of uranium miners rose sharply as traders bet a new A.I. investment of US$500 billion unveiled by US President Trump would mean an increased role in nuclear energy for power-hungry data centres.
- Woodside shares dropped as Australia’s biggest oil and gas producer announced fourth quarter revenue down 6% to $3.47 billion.
- The iron ore price remained near four-week highs as better than expected data from China buoyed sentiment and China demand for the metal remained resilient.
- Oil prices fell this week on concerns newly inaugurated President Trump’s policies may lead to increased supply, with Trump urging more Saudi investment in the US and urging OPEC to lower prices.
- The Aussie dollar rose against the US dollar, with the US dollar falling on signs President Trump’s tariffs might be more measured.
Economics
- Australian company insolvencies were up almost 50% in the second half of 2024, according to ASIC data. The record number (11,053) is expected to rise this financial year up to 16,000. Construction insolvencies were up almost 30%.
- US industrial production rose by 0.9% in December, coming in above expectations.
- US housing starts lifted to 15.8% whilst building permits fell by 0.7% in December, both coming in above expectations.
- The IMF’s world economic outlook update revised up US economic growth to 2.7% in 2025 from 2.2%, with a slight upgrade to 2026 forecasts, citing robust underlying demand from strong wealth effects, lower interest rates, and supportive financial conditions.
- New Zealand fourth quarter inflation eased to 0.5% quarter on quarter, from 0.6% in the prior period and in line with expectations. This left the yearly rate at 2.2%, the lowest since the first quarter of 2001 and near the mid-point of the central bank’s target. Another 0.50% rate cut is expected in February.
- The Chinese economy expanded 5.4% in the December quarter versus a year earlier, coming in above expectations and is a lift on the 4.6% reading in the prior quarter.
- Chinese industrial production rose 6.2% in December, coming in well above consensus and follows the 5.4% rise in November.
- Chinese retail sales increased 3.7% in December, coming in just above consensus and above the 3% increase in November.
- New home prices in China were flat in December, after a 0.1% dip in November, with prices steady for the first time since June 2023 after seventeen months of decline. Prices were still down 5.3% on the same period last year, but declines are clearly abating.
Politics
- Donald Trump was inaugurated as the 47th President of the United States of America and then spent most of the week signing and talking through a raft of executive orders. Interestingly, Trump refrained from implementing China specific tariffs on day one, but reiterated his threat of tariffs on Mexico and Canada unless they secure their borders. Other orders covered tax, tariffs, industry policy, immigration, energy, and the environment.
- US President Trump cited a positive conversation with Chinese President Xi where they apparently discussed trade, Fentanyl, TikTok, and other topics. Chinese media cited Xi as saying he was hopeful for a good start to relations and trade relations should be based on mutual benefit and not on conflict.
- China’s Vice Premier at Davos said China does not seek a trade surplus and will expand imports to purchase more competitive, quality products and services to promote balanced trade, whilst adding Beijing is removing more hurdles for companies to invest in the market.
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