- The trade talks between the US and China appear to have started improving, although the uncertainty continues to impact markets with volatility remaining high. Despite the geopolitical uncertainty most major markets are up from a month ago on improved expectations.
- Australian equities have been strong with the IT, consumer discretionary and industrial sectors leading the way. Energy stocks were supported in September following a drone attack on an oil processing facility in Saudi Arabia (the world’s largest producer) which led to a sharp increase in oil prices.
- At their October meeting the RBA cut the cash rate to 0.75% as concerns grew over employment growth and inflation. Another rate cut in the short-term is expected (in effort to further boost the economy and inflation) however zero and negative rates are unlikely. If needed, it is more probable that the RBA turns to other methods such as quantitative easing (printing more money/injecting liquidity into the economy).
- The deadline for the UK to leave the European Union (EU) has been extended three months to 31 January 2020. The EU is likely to offer a further extension if a deal cannot be agreed upon by the deadline to avoid a politically and economically damaging no-deal Brexit. This is the third time that the Brexit deadline has been changed since voters decided to leave the EU.
- UK Prime Minister Boris Johnson continues to push for an election to break the political impasse over Brexit but has lost a recent vote in the House of Commons to hold a general election on December 12.
- The People’s Bank of China cut their reserve requirements for all banks to help shore up the Chinese economy as industrial production slumped it weakest rate in 17 years. The Chinese economy is experiencing growing pressure from the unresolved trade war with the US as well as slowly declining domestic demand.
- Demand for bonds has decreased with the 10-year government bond yield increasing to 1.14% as investors favoured equities.
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