All things Market Related – September 2019

Australia

The ASX200 Index closed the month down 1.83% at 6688 points following a drone attack on a Saudi Arabian oil facility. As a result of the attack, the world’s largest oil processing facility halved its production output and sent the oil price soaring by almost 15%. Oil producer share prices around the globe rose on the back of the news. Despite the attack, the Saudi’s have said oil output will be fully restored by month end. The worst performing sector was telecommunications which dropped by 7.68% mainly due to Telstra. Shares in the telco fell as the TPG merger decision looms. The $15bn TPG-Vodafone merger will be one of the most important legal cases in Australia this year. If courts overturn the ACCC’s initial decision to block the TPG-Vodafone merger, the consequence would be the creation of a third mobile player in Australia; one that has the potential to compete with Optus and Telstra. A decision is due by the end of the year. Telstra shares have fallen more than 10% since its August high.

In economic news, the RBA cut rates to a fresh all-time low of 0.75%. There is a growing consensus that another cut could be on the cards, taking the official rate down to 0.50%. Some analysts think it could go even lower to 0.25%. There are however signs of moderate economic growth generating good growth in employment. Q2 GDP rose 0.5% qoq while year-on-year GDP growth fell to 1.4% in Q2.

Global Markets

Wall Street closed slightly up 0.20% and the S&P 500 was down 0.12%. Hong Kong stocks continue to fall after National Day Demonstrations turned violent. Beijing celebrated the 70th anniversary of communist rule with a massive parade. Amid the celebrations mass demonstrations continued in Hong Kon where a police officer shot a protestor at close range. Hong Kong stocks fell by 7.50%. Research houses are downgrading their global economic growth forecasts due to rising risks emanating from the US/ China trade war as well as the Middle East oil saga and escalating tensions in Hong Kong/China. In the EU, markets are preparing for a hard Brexit which will almost certainly lead to a recession. Germany is also at risk of recession.

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September outlook:

There are two things Australian investors need to keep their eyes on:

  • US rate cut and jobs data
  • The US-China trade war
  • Growing fears of recession
  • Hard Brexit
  • Trump impeachment

A formal Trump impeachment inquiry? Just to add another worry to the list, Trump has thrown in a wild card at a time when share markets are volatile and unpredictable. While it’s hard to know what might happen to Trump, the same can also be said about how stock markets will react if he is impeached. This is a rare event that has only happened twice in US history so market data is limited. At the time of writing stock markets are trading down on this news.

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