Key Data for the Week
Key economic data released this week:
The Australian sharemarket rose for a second straight session yesterday to close 0.7% higher. Gains were again widespread across the market, with Consumer Staples and Utilities the only sectors to close lower. Telecommunications was the best performing sector, buoyed by Telstra, which climbed 2.3%.
AGL Energy fell 4.6% following a downgrade to its underlying profit forecast for FY20, with the energy producer expecting a ~14% decline for the year, impacted by an unplanned outage of its Loy Yang Plant in Victoria.
IAG gave up 5.0% after announcing its insurance profit dropped 13.0% in FY19. The result was impacted by higher claims from natural disasters, such as the December 2018 hail storm in Sydney, along with lower returns on fixed interest investments.
The Australian futures market points to a 0.6% rise today, being driven by broadly stronger overseas markets.
European sharemarkets enjoyed their best session in almost two months on Thursday, boosted by upbeat Chinese trade data and the decision by the Chinese government to set a stronger than expected fixed rate for their yuan. All major indices in the region ended the session higher, with the broad based STOXX Europe 600, France’s CAC 40, Germany’s DAX, Italy’s FTSE MIB and the UK’s FTSE 100 all posting solid gains of over 1.0%.
US sharemarkets also closed higher overnight. Technology stocks led the gains; sector heavyweights Facebook and Microsoft both rose 2.7%, Alphabet climbed 2.6%, while Amazon and Apple both gained 2.2%. Financial services companies MasterCard and Visa also posted strong gains, ending the session 3.2% and 2.6% higher respectively. By the close of trade, the Dow Jones closed 1.4% higher, the S&P 500 gained 1.9% and the NASDAQ lifted 2.2%.
Unlike most developed countries, who have a floating exchange rate, the ability for the Chinese to set their own currency rate gives China a powerful tool to protect their economy against external forces.
China's currency fix is published every day after a group of 14 lenders submit their rates, and the yuan is then allowed to move 2% in either direction.
A significant move this week, to depreciate the yuan, has caught global attention. The People's Bank of China set the daily reference rate above 7.0/US Dollar, for the first time since 2008.
A weaker currency will go part way to offsetting the impact of higher tariffs on Chinese goods, but a significant further weakening from here could cause greater instability and a flurry of investors exiting the yuan, something Chinese officials have sought to avoid.
In addition, the weaker the yuan is set, the more likely it is the Trump Government will impose more tariffs.
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