WEEK IN REVIEW: 9 - 13 DECEMBER
Craigs Investment Partners Research Team, 13 December 2019
A looming US-China tariff deadline and several announcements from governments and central banks worldwide took market attention globally this week. Closer to home, New Zealand markets absorbed the Government’s release of its half-year economic and fiscal update.
a2 Milk announced the shock exit of its CEO on Monday morning. The dairy company announced that its CEO and Managing Director, Jayne Hrdlicka, agreed to step down from her role less than 18 months after being appointed. At the same time, the Board announced that the company’s former CEO Geoffrey Babidge has accepted the role as interim CEO commencing immediately whilst a global search for a new CEO takes place.
New Zealand stock exchange operator NZX Ltd released its earnings guidance on Monday. The company announced that its operating earnings are expected to be around the top of its $28m to $31m guidance range. The updated FY19 guidance has been attributed to increased capital raised during the year, additional one-off revenues in data and insights, and consulting revenue from energy contracts.
The New Zealand Government released its Half-Year Economic and Fiscal Update. The Government announced on Wednesday that it intends to increase infrastructure spending over the next few years. An extra $12bn of infrastructure spending has been added to the fiscal outlook, with $8bn for specific capital projects and $4bn to the multi-year capital allowance. The Treasury estimates that this will boost real GDP growth by 1.4% over the next five years.
Retail card sales bounced back in November. Statistics New Zealand released retail card sales data on Wednesday, which showed total retail card spending increased 2.5% in the month of November. This is the biggest increase since January 2017. The rise was attributed to the Singles Day and Black Friday retail events, where New Zealanders spent record daily amounts.
The US Federal Reserve kept benchmark interest rates the same. The Fed decided to leave its benchmark interest rate in the current range of 1.5%-1.75% on Wednesday, as expected by the market. Federal Reserve Chair Jerome Powell said that the economic outlook remains favourable, despite global developments and ongoing risks. The Fed also signalled it would keep rates on hold until at least 2021, with economic projections released showing a majority of 13 out of 17 policymakers see no change in interest rates until at least 2021.
Investors remained wary this week with the US-China tariff deadline not looking likely to be met. Markets worldwide continued to watch trade headlines, with investors remaining on edge over whether tariffs will take hold on 15 December. White House adviser Peter Navarro said during the week that he had no indication that President Donald Trump will do “anything other than have a great deal or put the tariffs on.”
Donald Trump’s impeachment charges announced. On Tuesday, US House Democrats outlined two articles of impeachment against US President Donald Trump, accusing him of abusing his power by pressuring Ukraine to investigate his political opponents and of obstructing Congress’ inquiry. Trump will likely be formally impeached by a House vote next week, leading to a trial in the Senate, which can remove him from office by a two-thirds vote.
Saudi Aramco has a historic market debut. Saudi Aramco, the Saudi Arabian oil company, pulled off the biggest IPO in history, raising $25.6bn by selling 1.5% of the company. Shares in the oil company increased 10% in its first day’s trading on Wednesday, making the company the biggest in the world by market cap, at $1.9tn.