Weekly Market Commentary
Global equity markets crashed to earth over the last week, driven into disarray by the US/China trade situation. The G20 trade impasse was initially greeted with a positive reception, but upon reflection, has put a cat amongst the pigeons. The 'Non-Agreement was an extension to negotiations with no substantial progress. This has dented global growth prospects and this has hit equities hard.
The Growth narrative puts further pressure on the Fed to ease monetary policy, which was reflected in the fall in US bond yields. The Dollar remained steady, a byproduct of a safety play, rather than support from higher interest rates. Chinese/US relations were not assisted by arrest of the Huawei CFO, in Canada, on behalf of the US. The EUR held 1.1370, supported by a positive moves around the Italian budget crises, while the GBP held 1.2730. Brexit remains an existential threat to both the UK and the EU.
US Non Farm Payrolls missed expectations, but this confirmed a market narrative of slower economic growth, further denting equity prospects. The coming week us growth and inflation data being released from Europe and the US, while the ECB rate decision is likely to confirm an end to QE. The pressure on growth has spurred softer interest rates, which has taken the spotlight of the global debt crises looming. This may allow the consumer to re-engage, boosting consumption and demand.
OPEC and Non-OPEC nations agreed to cut 1.2 Million barrels/day of global production, more than expected, forcing the Oil price back to $54/barrel. The collapse in oil prices has hit energy companies hard, but remains a groans stimulant. It is hard to see the downward moves arrested overnight.
Commodity currencies have suffered the global trade narrative, with the AUD falling back to 0.7200, while the NZD holds 0.6850. These trade exposed currencies remain pretty resilient although trade remains their Achilles heel.
Weekly Market Calendar
10/12 NZ House Sales, China PPI, Japan GDP, Japan Current Account, German Trade Exports/Imports, UK Trade Exports/Imports, UK Industrial/Manufacturing Production, UK GDP, EU Investor Confidence
11/12 NZ Credit Card Spending, Australia Consumer Confidence, Australia House Prices, Japan Employment, German/EU ZEW Economic Sentiment, NFIB Small Business Optimism, US PPI
12/12 Australia Consumer Confidence, EU Industrial Production, EU Employment, US Weekly Mortgage Applications, US CPI, US Budget
13/12 NZ Food Prices, Australia Inflation Report, German CPI, ECB Rate Decision
14/12 NZ Manufacturing PMI, Australia Manufacturing PMI, Tankan Report, China Retail Sales, China Industrial Production, Japan Industrial Production, France/German/EU Manufacturing/Services/Composite PMI, US Retail Sales, US Manufacturing/Industrial Production
Paul Bettany
Collinson & Co
0406-744-923
paul@collinsonfx.com.au