Key Data for the Week
Key economic data released this week:
The Australian sharemarket closed higher for a 10th session in 12 days yesterday, ending up 0.15%, led by gains in the Energy sector.
Westpac continued to weigh on the Financials sector following its disappointing earnings results released on Monday, ending the session 2.6% lower. The other major banks posted gains; Commonwealth Bank climbed 0.8%, NAB lifted 0.6% and ANZ added 0.4%.
Goldminers were under pressure as the price of the precious metal fell, as Evolution Mining, Newcrest, Northern Star and Saracen Minerals all closed down between 2.0% - 3.4%.
Lithium stocks gave up some of their recent gains from the instability in Chile, with Pilbara Minerals dropping 7.9% and Galaxy Resources falling 4.7%. Diversified miners performed better, with BHP and Rio Tinto both closing up 1.3%, while Fortescue Metals gained 1.6%.
The Australian futures market points to a 0.28% rise today.
European sharemarkets rose on Tuesday to hit more than four-year highs, in response to a rally in commodity prices and sectors dependent on global economic activity. Defensive sectors like Utilities, REITs and Health Care all closed lower. The STOXX Europe 600 rose 0.2% to close at its highest level since July 2015, while the German DAX climbed 0.1% and the UK FTSE 100 added 0.3%.
US sharemarkets were mixed overnight, showing resilience after hitting all-time highs in recent days. Gains were led by the Energy sector, while banks and grocers led Financials and Consumer Staples higher respectively. REITs and Utilities were the major laggards, while the Health Care sector was weighed down by disappointing earnings results from Becton Dickinson (-5.4%) and Myriad Genetics (-40.4%). Uber fell 9.9%, despite beating Q3 revenue, EPS and EBITDA market estimates, with increased competition for Uber Eats and share loss in rides among the concerns. By the close of trade, the Dow Jones gained 0.11% and the NASDAQ lifted 0.02%, while the broader S&P 500 slipped 0.12%.
Lebanon may not be considered an economic powerhouse, but the downgrading of their credit rating by Moody’s last night, illustrates the effect a downgrade can have on bond prices.
Lebanon’s credit rating was cut one notch further into ‘junk’ territory, reflecting the increased likelihood of debt default, and remains on negative watch.
Lebanese government bonds have collapsed by 18% this year, with their 2027 bonds falling nearly 5% last night.
While there may only be a minimal knock-on effect from this particular credit downgrading, it does illustrate the effect a downgrade can have on bond prices and the bond market generally.
As we have highlighted recently, there has been significant growth in BBB rated US corporate debt.
The risk to the bond market is a downgrade here, given the volume and breadth of this debt and the widespread knock-on effect it would have.
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