- The Reserve Bank of Australia [RBA], held the Cash rate at a record low of 0.75% on the 5th of November. Economic consensus suggests the market expects at least two rate cuts by mid-2020. In commentary, the RBA advised that global risks are ‘tilted towards the downside’, and that the outlook for the Australian economy was ‘little changed from three months ago.’ The view is that Australian growth should be 2.25% in 2020 and approximately 3% in 2021.
- There is a lot of negative commentary regarding the current state and outlook for the Global economy. Certainly, there are structural risks, and there is the possibility of a structural break in the economy that could slow growth further, such that prudent investors should be prepared and positioned for a 3-4 year slow down period, though there is no guarantee that this will occur.
- The RBA is running out of conventional monetary options such as lowering interest rates, and if the economy was to decline, they could be forced into non-traditional measures such as Quantitative Easing or negative interest rates. There has been little evidence that these measures have been successful in increasing growth when implemented by central banks offshore.
- Australian Inflation remains low at 0.3% in the September quarter and 1.7% over the year.
- Australia’s unemployment rate fell slightly to 5.2%, in September, with the market expecting a lift in the rate of unemployment in coming months.
- Household services continue to see rapid employment growth, with business services employment continuing to improve. Changing technology is going to start to have a greater influence on the employment market in coming years.
- Westpac [WBC] on 4 November cut its dividend for the first time in a decade after the bank’s full-year cash profit fell 15% to $6.85 billion. An interesting point was that customers are closing out debt, which may be a sign that Australian households are becoming more financially conservative. WBC also announced a $2.5bn capital raising to meet regulatory capital requirements and expected litigation costs.
- Commonwealth Bank’s [CBA] statutory net profit after tax declined 8% to $8.571 billion in FY 2019, its full year 2019 dividend remained the same as FY 2018 at $4.31 per share.
- ANZ released its FY 2019 at the end of October, showing an after tax profit drop of 7% to $5.93 billion.
- The Australian 10-year bond yield lifted to 1.29%, slightly higher than last month as the RBA held interest rates in place. The 2-year yield is 0.88% and the 5-year yield is 0.93%.
- The US 10-year bond yield is currently 1.883% close to its three month high in a relatively volatile market. The yield jumped 15 basis points recently to 1.96%, the biggest jump since the 20-basis-point move the day after President Trump was elected in 2016.
- US bond yields have lifted due to a combination of better-than-expected corporate profits, the end of the Federal Reserve’s “mid-cycle” cuts and improving US-China trade relations.
- With approximately 30% of global tradable bonds at negative yields, worth approximately $25 trillion, bond yields could hand many of these investors a loss if this continues, and central banks do not enter the market to drive yields down again.
- The Federal Open Market Committee Next meets 10-11 December. The current Federal Funds rate is 1.50% -1.75%.
- The European Central Bank [ECB] anticipates the second half of 2019 as likely to see moderate to positive growth, more positive than expected.
- The German 10-year bond yield is -0.26% up slightly from -0.64%.
- Trade negotiations between the US and China seem to be leading towards a limited tariff-reduction deal with an announcement by China’s Commerce Ministry of a tentative agreement that “China and the US should remove the same proportion of tariffs simultaneously based on the content of the deal.”
- China’s economy grew at a slower pace in the 3rd quarter expanding at 6% over the same period a year ago, China accounts for about 16% of global Gross Domestic Product.
- China’s government continues to target growth of 6 – 6.5% per year.
- The ASX200 Index lifted 0.12% over the last 30 trading days. The ASX200 chart is shown below.
- CYBG PLC [CYB] 36.81%, IOOF HOLDINGS LTD [IFL] 28.84%, ARDENT LEISURE GRP LTD [ALG] 21.87%, BLUESCOPE STEEL LTD [BSL] 21.72%, XERO LTD [XRO] 21.52% , PINNACLE INVESTMENT ORDINARY [PNI] 20.95%, SIGMA HEALTH LTD [SIG] 20.35%, NRW HOLDINGS LIMITED [NWH] 20.18%, FISHER & PAYKEL H. [FPH] 18.15%, and CLINUVEL PHARMACEUT[CUV] 17.60%.
- The poorest performing stocks were :
EVOLUTION MINING LTD [EVN] -14.75%, NEWCREST MINING [NCM]-15.47%, PRO MEDICUS LTD [PME] -15.94%, COSTA GROUP HOLDINGS [CGC] -16.71%, SPEEDCAST INT LTD [SDA] -17.69%, WISETECH GLOBAL LTD ORDINARY [WTC] -19.26%, RESOLUTE MINING [RSG] -20.00%, AFTERPAY TOUCH [APT] -21.02%, STHN CROSS MEDIA [SXL] -21.73%, and NORTHERN STAR [NST] -23.07%.
- The five best and worst percentage performing sectors in the ASX 200 over the last 30 trading days were HEALTH CARE 9.37%, ENERGY 4.21%, MATERIALS 1.18%, RESOURCES 1.07% and CONS DISCRETIONARY 1.04%.
- The poorest performing sectors were UTILITIES -0.51%, PROPERTY -0.55%, EMERGING COMPANIES -0.64%, and CONSUMER STAPLES -1.25%.
- The broad global equities index (MSCI ACWI) delivered a 2.74% return in October and a 8.72% one year change.
- The US S&P500 lifted 4.13% in October, and is up 11.22% over the past 12 months, the STOXX Europe 600 Index was up 3.53% over the past month, and up 10.95% over the last 12 months. The Shanghai stock index was off -0.32% over the past month and up 14.06% over the last 12 months.
- US S&P500 company earnings are expected to decline 1.1% for the first time since 2016 in the 3rd quarter.
- The gold price [US$1500/oz.] fell slightly over the past month while the silver price [US$17.82/oz.] was slightly higher in a relatively subdued market. Nickel prices weakened over the past month following the lift in prices due to the Indonesian nickel export ban [US$16,184/tonne].
- Coal prices were weaker over the past month. WTI Crude oil is currently quoted at US$57.24/bbl.