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3 Minute Economic Summary: October - November 2019

Article By Adam Camac | | Financial Planning

  • The US Share market hit record highs over the past month owing to the Federal Reserve’s latest interest rate cut and improvements in trade talks between China and the US. The Fed decided to lower the target range to 1.5% - 1.75% in light of weak inflation figures and its global outlook.
  • The Australian share market continues to be susceptible to volatility cause by geopolitical risks. The domestic marked was slightly down over October but then rallied over November as the US-China trade war news had improved. Australian equities were supported by strong performance from the IT, consumer discretionary and industrial sectors. The financial sector has been weaker, largely caused by the fall in Westpac’s share price as a result of some damaging findings by AUSTRAC.
  • There was also further market volatility in late November caused by the US. The US passed a bill supporting Hong Kong’s anti-government protestors which led to markets dropping as concerns grew over how this would impact the relationship between China and the US and the trade negotiations which had been improving.
  • Global share market volatility is expected to remain until an agreement is determined. However, a partial resolution (phase one) had appeared near with Chinese vice premier and chief trade negotiator Liu He saying he was ‘cautiously optimistic’ about reaching a phase one deal prior to the above US bill being passed.
  • The unemployment in Australia rate rose from 5.2% to 5.3% in October increasing expectation that the RBA may reduce the official cash rate from 0.75% down to 0.5% in the new year. At their November board meeting the RBA left the cash rate at 0.75% and is now in the difficult position whereby interest rates around the world are low/will be reduced further, and the RBA must balance stimulating inflation with the perception that a further cut might negatively impact consumer confidence .

 

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