Uneasy Calm
David Bassanese | Oct 22, 2018 10:44
Originally published by BetaShares
An “uneasy calm” is perhaps the best way to characterise global markets last week – with little in the way of major events and investors only left with their nerves to deal with. The release of the latest Fed minutes only affirmed its intent to keep raising rates – which supported the US dollar – while tensions between Italy and the EU also added to investor caution.
While oil prices eased due to a strong US inventory build, new doubts also emerged over whether Saudi Arabia is willing (and able) to boost supply in coming months to make up for the sanction-induced looming reduction in Iranian exports.
Although early days, America’s earnings reporting season also remained encouraging – according to FactSet, of the 20% of S&P 500 companies that have so far reported, 80% have beaten expectations. Given investor nervousness, however, these results were dulled by growing talk of a possible post-tax cut slowdown in US earnings growth in 2019.
In Australia, the highlight was a larger than expected drop in the unemployment rate to 5.0%, which led to chatter about a potential bring-forward of RBA rate hikes. Given interest rates remain at very low levels, and the $A is now a lot more competitive, to my mind the RBA would likely be contemplating higher rates – potentially by year-end – were it not for the risk that this, along with tightening lending conditions, could combine to destabilise what still remains an “orderly” correction in Sydney and Melbourne house prices.
That said, if the economy retains its current momentum (which is partly dependant on the home building pipeline), a rate hike by February 2019 is not out of the question. After all, if the unemployment rate has fallen much faster than the RBA expected, it follows that the timing of the inevitable lift in official rates could also be earlier than previously anticipated. Watch this space!
h2 Week ahead/h2Global highlights this week include US Q3 GDP, which is expected to show economic growth slowed to a (still firm) 3% annualised rate from 4.2% in the June quarter. The US earnings reporting season also rolls on, with critical reports from some tech darlings – Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) – due mid-week. Last quarter, tech earnings remained very strong, which brought some relief to nervous investors at the time. We’ll also need to keep tracking developments in Italy and Saudi Arabia.
Get The App
With little major economic data in Australia, local interest will be focused on the corporate outlook gleaned from a slate of annual general meetings.
Have a great week!
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.