2 Mar 2018
Trump protectionism spooks markets
Markets
- Stock markets were lower this week on US rate rise concerns and Trump protectionism.
- In local stock news, QBE has agreed to sell the bulk of its Latin American division to Zurich Insurance for 1.4 times the carrying value on their balance sheet. The real clean-up finally begins.
- Platinum Asset Management’s share price fell sharply after the announcement that founder Kerr Neilson would be stepping down as CEO. The succession plan has been in place for some time and his handing over of the reins isn’t a complete surprise / concern given the quality of people in the business. More than capable Andrew Clifford will take over as CEO.
- The Aussie dollar fell on weaker Chinese data and upward pressure on the US dollar as the probability of 4 US rates rises this year increased.
- Oil prices fell this week on the back of slowing factory activity in China, India, and Japan.
Economics
- The US central bank eased concerns about the path of interest rates rises in 2018 whilst it expected economic growth to remain steady with no serious risks on the horizon that might pause their planned pace of gradual rate hikes. The market has assigned a 95% probability of a rate rise in March.
- US new home sales fell for a 2nd straight month in January, dropping close to 8% from the previous month and coming in well below market expectations of a 4% rise. The median sales price of new houses sold was also lower in January.
- US durable goods orders fell in January, coming in well below expectations, whilst consumer confidence rose to levels not seen since November 2000.
- Eurozone inflation fell in January from the December reading, coming in at 1.3%. However, European Central Bank President Draghi suggested the bank was still confident inflation was on an upward trend, thus supporting market expectations for an end to their asset buying program (QE) this year.
- Poorer than expected Chinese manufacturing data hurt resource stocks globally, whilst Japanese factory output and retail sales came in weak.
Politics
- President Trump pulled the trigger on US protectionism imposing global tariffs on steel and aluminium imports into the US at 25% and 10% respectively. Protectionism breeds further protectionism, but no one should be surprised by his move.
- The Chinese government seized control of one of the country’s largest conglomerate non-state owned/run corporates, Anbang Insurance Group. The insurance regulator claims that the company has violated laws and regulations putting the solvency of the company at risk. Anbang owns $311bn in assets globally.
- China appears likely to change its constitution to allow President Xi to rule beyond his current term by removing the maximum 2-term provision.
