13 Oct 2017
US unemployment hits 16 year low
Markets
- Local and global equity markets pushed higher this week.
- US corporate earnings season kicked off this week, with 3rd quarter earnings expected to grow by 4% on the same time last year. This is well below the stellar 1st two quarters of the year, which saw earnings surge 15% and 11% respectively.
- In local stock news, Transurban reported strong revenue growth in the 1st quarter, benefiting from stronger than expected traffic growth, toll escalations, and positive traffic mix (ie. more trucks than cars).
- The oil price finished higher this week, the result of supply concerns given 85% of US output in the gulf of Mexico remained offline due to hurricane activity, and due to ongoing rhetoric from OPEC and non-OPEC countries regarding production cuts.
- The iron price fell to lows not seen since June following concerns around growing steel inventories in China and potential curbing of iron ore purchases ahead of steel production cuts due to begin in mid-November to help improve air quality.
Economics
- The Australian construction sector continues to expand, but the rate of expansion is softening due to slowing apartment building, with a key index printing its lowest reading in a year. Engineering construction and house building continue to drive growth in the sector.
- Australian business conditions remained strong in September, whilst business confidence edged a little higher. The construction industry is leading the way. In contrast, retail is lagging with conditions at negative levels.
- The number of home loan approvals rose 1% in August, beating market expectations. The value of loans approved for investment housing rose strongly at 4.3% compared to July.
- US non-farm jobs report showed a loss of 33,000 jobs September, no doubt heavily impacted by hurricane activity. The decline broke the longest streak of job creation at 83 months. Unemployment fell to a 16 year low of 4.2% and average hourly earnings were up on last month.
- The probability of a US central bank interest rate rise in December has risen to 86%, in light of strong employment data and preference to get rates a little higher whilst the data allows. The minutes of their September meeting also leaned towards a December rate rise.
- German trade data showed exports surged in August to the fastest pace of growth in 12 months. The German government is likely to revise economic growth estimates up to their strongest level since 2011.
- A senior Chinese government official has stated that the country will have no problem reaching its economic growth target of 6.5%, whilst noting that policies to rein in the property market and speculation have been effective.
Politics
- The Spaniards are doing their best derail the momentum behind the Eurozone recovery, just when European political news started to take a backseat. The Spanish government and the regional Catalonian government are continuing to play a very dangerous game, one that is unlikely to end well.
- The US military flew 2 strategic bombers over the Korean peninsula, as President Trump met with defence officials to strategise how to deal with threats posed by the North Korean regime.
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