Markets were higher on Friday but for the week a bit of profit taking and a stronger AUD pressured global equity returns for local investors. No doubt stocks were in a “holding pattern” ahead of G-20 on the weekend. Also, the Federal Reserve (Fed) released the results of its Comprehensive Capital Analysis and Review of the 18 major U.S. banks, which is part of the regulatory reform following the 2008 financial crisis. The Fed noted that the banks have strong capital levels and virtually all are now meeting supervisory expectations for capital planning, which then buoyed the financial sector on Friday. U.S. banks can now increase their dividends.
It should be an interesting week coming up for markets given that President Donald Trump and Chinese President Xi Jinping agreed to a cease-fire on trade and will remove some of the curbs on Huawei Technologies buying high-tech equipment from the U.S. Under the cease-fire, the U.S. agreed to put off additional tariffs on Chinese goods indefinitely. In response, China will start buying large amounts of American farm products.
Weekly returns to 28 June 2019
(AUD 5-day return far right- hand column)
- 10-Year Treasury yield: -6 basis points to 2.00%
- Gold: +0.1% to US$1409.55
- WTI crude oil: +3.6% to US$58.47
- AUD/USD: +1.48% to 70.29
The week ahead
The economic calendar is a big one, featuring the employment situation report on Friday. The rest of the data – ADP employment, auto sales, and the ISM surveys – will be released over 2 ½ days as markets are closed for the US Independence Day celebration on Thursday.
Charts of the week
1. How expensive is the U.S. equity market?
Price/Free Cash Flow multiples S&P 500: Hardly excessive relative to its history.
2. U.S. online media bias: A fascinating snapshot
3. Is the U.S. consumer bullish? Definitely!