22 Sep 2017
Trump goads and baits North Korea in dangerous UN speech
Markets
- Equity markets finished mixed this week, with markets concerned by President Trump’s very public escalation in threats against North Korea.
- In local stock news, the Commonwealth Bank has divested its life insurance businesses to AIA for $3.8bn, well above expected valuations for the business. The bank has also announced a strategic review of its Colonial First State asset management business, which it will likely IPO or sell. Both divestitures will assist the bank in boosting their regulatory capital.
- The Tabcorp / Tatts Group merger has hit an unexpected stumbling blockwith the Federal Court setting aside the merger approval from the Australian Competition Tribunal, in favour of the competition regulator’s (ACCC) concerns. Another clear example of the ACCC not understanding the industry in which they’re ruling on.
- Sydney Airport reported continuation of surging international traffic with 8.3% growth in August on the same time last year.
- Rio Tinto has announced that it will distribute the $2.5bn in net proceedsfrom the sale of its Coal & Allied assets through another share buy-back, rather than a special dividend. Disappointing for some investors, but the buy-back will boost earnings and provide further share price support in light of potential volatility in the iron ore price over the next few months.
- The iron ore price fell sharply this week, unwinding some of the strong gains more recently. Reasons cited for the fall included weakness in Chinese steel markets and demand concerns given potential new Chinese government directives.
Economics
- Australian mortgage delinquencies hit a 5 year high in May according to a credit agency whilst other data revealed that the proportion of Australians behind on their mortgage payments also ticked higher in July. Delinquencies remain low in absolute terms, but the trend is important.
- Home prices across Australia’s capital cities have continued to lift, rising 10.2% in the year to June, led by Sydney and Melbourne. Prices in Perth and Darwin fell. The June quarter saw Sydney prices rise by 2.3%.
- The RBA Governor has outlined that the success of Australia’s economic future depends on whether it can boost productivity, engage Asia, absorb the effects of rising global interest rates, and manage sky-high household debt.
- The US central bank announced no change to rates and that it will begin to reduce the size of its $4.5 trillion asset portfolio beginning in October. The move was well flagged. In addition, the bank indicated an increased likelihood of a December rate rise barring any major changes to data, though they did adjust downward their expectations of the long term equilibrium rate to 2.75%.
- Wages in the Eurozone grew at their fastest pace in 2 years in the 2ndquarter. Wages rose 2% on the same time last year, no doubt putting much needed upward pressure on inflation.
Politics
- President Trump headlined the United National (UN) General Assembly, first by calling out the UN as being mismanaged and overly bureaucratic. He then laid into North Korea saying that “Rocket Man” Kim Jong-un is on a “suicide mission” and that he would “destroy” the country if the US was forced to act.
- The Germans head to the polls this weekend for their federal elections. Chancellor Merkel is expected to retain power, but the make-up of that power is up for grabs.
