The Australian market was lower last week, weighed down by North Korea’s hydrogen bomb test last weekend, its largest ever nuclear test. Investors shifted assets into gold which rallied to over US $1,350 in response. The Reserve Bank of Australia left the cash rate on hold at 1.50% and maintained their concern over low wage growth, high levels of household debt and recent Australian dollar appreciation which could result in a slower pick-up in economic activity and inflation”.
On a sector level, the best performers were real estate which was supported by a fall in bond yields on concern over North Korea and more dovish than expected central bank remarks, telecommunications and materials. The worst performing sectors were financials, information technology and consumer staples. In company news, one of the best performers on the ASX 200 index was Vocus Group Limited on reports that it had signed a deal with U.S. data centre provider Equinix to connect its Australia Singapore Cable (ASC) with Equinix customers.
In global markets, Wall Street was also lower due to the heightened tensions with North Korea. A rebound in energy shares mid-week led U.S. benchmarks higher as congressional leaders and President Donald Trump agreed to extend the debt limit deadline and fund the government through mid-December. This wasn’t enough to move markets into the black though as investors continued to grapple with concerns over North Korea, Hurricane Irma, doubts about President Trump’s business-friendly agenda, news Stanley Fischer (Vice Chairman of the Federal Reserve) resigned and persistent worries about elevated stock valuations.
European markets were mostly lower with Germany’s DAX 30 being the exception. The European Central Bank held rates steady this week and did not offer any new information on their Quantitative Easing program which helped lift markets late in the week. Asian markets were mostly lower on concern over North Korea and the direction of global monetary policy.
The Australian dollar was mixed against major global currencies again this week. The big story was the Australian dollar pushing through US81c on Friday on U.S. dollar weakness following a European Central Bank policy meeting that did not include an attempt to jawbone the Euro lower.