Key Data for the Week
Key economic data released this week:
The Australian sharemarket closed 0.5% lower yesterday, led by losses in the Financials and Health Care sectors. Resmed continued its recent decline, following the release of their December quarterly results, closing down 10.4%, while CSL gave up 2.3%.
Telecommunications stocks were the standout performers, buoyed by Telstra, which ended the session 7.8% higher, following TPG’s decision to cancel its plans to build a 5G mobile network. TPG closed up 3.0%.
Materials heavyweights BHP and Rio Tinto both had strong sessions, rising 2.1% and 3.8% respectively, however lower oil prices weighed on Energy stocks, with Santos closing down 1.1%.
The Australian futures market points to a 0.39% rise today, driven by stronger European markets overnight.
European sharemarkets were firmer on Tuesday, ahead of key events this week such as the US interest rate decision and US-China trade talks. The broad based STOXX Europe 600 rose 0.8%, the UK FTSE 100 lifted 1.3% and the German DAX eked out a 0.1% gain.
US sharemarkets closed mostly lower on Tuesday, despite earnings results being generally positive. Investors continue to wait for key earnings releases from technology giants such as Alibaba, Amazon, Apple, Facebook and Microsoft this week. By the close of trade, the S&P 500 had given up 0.2% and the NASDAQ slid 0.8%, however, the Dow Jones climbed 0.2%.
Fear that China’s slowing economy and fallout from the trade war will domino into significantly weaker GDP in the US are probably overdone.
There’s no doubt China’s slowdown will see a deceleration in world growth, but the US economy and businesses are still growing, thanks to healthy consumer spending, which is still the biggest driver of GDP.
Bank lending to consumers in the US, as reported by JP Morgan and Bank of America, has grown and more importantly, the credit quality of their consumers continues to improve, as reflected in falling write-off provisions.
With unemployment at a record low and job hiring continuing, it seems the US consumer will continue to drive US GDP.
The same is probably not the case in Australia, where lending has contracted and unemployment is holding steady. However, the other major input into GDP is government spending, and that should keep Australia’s GDP positive for a bit longer.
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