Weekly Market Update
2nd December 2019
Equity investors buoyed by potential trade deal
Local and global equity stocks moved higher on optimism that a phase 1 trade deal is imminent following indications from both sides that a general agreement had been achieved.
In local stock news, Westpac’s Chair and CEO both announced their resignations following the bank’s money laundering scandal. A board refresh is also likely, whilst a fine of $750m to $2bn is possible, though the resignations may go some way to appeasing the regulator.
Caltex shares jumped after announcing it would launch a property IPO and float a 49% stake in 250 petrol stations. The news was trumped by Canadian convenience store operator Alimentation Couche-Tard who has made an offer of $8.6bn for Caltex on condition the property IPO doesn’t proceed. A higher offer may be needed to get the deal done.
Telstra shares rose this week after CEO Andy Penn reconfirmed the company’s guidance at its investor day presentation.
Woolworths CEO has given up a potential $2.6m bonus as a consequence of the supermarket giant’s underpaying of 5,700 staff over many years.
Australian data has shown that whilst inflation remains low, food and non-alcoholic beverage prices have risen much more strongly as a result of the drought, insatiable Chinese demand for our goods, higher fuel costs, and the continued lack of competition in the groceries sector.
Construction work completed across Australia fell by a less than expected amount in the September quarter. Building work on homes declined by 3.1%, whilst work on non-residential buildings increased by 4%.
Governor of the Reserve Bank of Australia said he did not expect to have to use quantitative easing (QE) in Australia, but that it could happen if the cash rate was cut to 0.25%. Given rates are at 0.75% and consensus is 1-2 more rate cuts, QE looks more likely than he’s suggesting.
US economic growth picked up slightly in the 3rd quarter, whilst consumer spending maintained a steady increase in October.
US manufacturing output accelerated in November to its fastest pace in 7 months and services activity picked up more than expected.
US consumer confidence fell for the 4th straight month in November but remained in positive territory, whilst new homes sales unexpectedly dropped in October.
Surveys showed business activity picking up slightly in France, whilst German business conditions continued to deteriorate in November but at a slower pace.
British data showed businesses suffering their deepest downturn since mid-2016, not helped by the impending election and concerns surrounding Brexit.
Trade rhetoric was positive this week with US President Trump saying a trade deal with China is “potentially very close”. Chinese authorities also indicated they wanted to work out an initial agreement, and were willing to improve protections for intellectual property rights
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