The Australian market was higher last week but the ASX 200 still couldn’t break through the 5,700- 5,800 trading range. The negativity created by U.S. and North Korea tensions eased and this helped support markets with momentum picking up throughout the week as investors digested more earnings results. Labour market data released this week was firm with employment growth and the unemployment rate falling to 5.6%.
On a sector level, the best performers were consumer staples, consumer discretionary and real estate. The worst performing sectors were telecommunications, utilities and information technology. The fall in the telecommunications sector was driven by Telstra which reported that it would cut its dividend in an attempt to better compete in this “highly competitive and dynamic market”. Cochlear was one of the best performers in the S&P/ASX 200 index this week after announcing that net profit for FY17 was up 18% to $223.6m and the final dividend would be increased by 17% to $1.40. Domino’s Pizza was one of the worst performers as its earnings missed expectations and company guidance.
In global markets, Wall Street was lower as investors continued to ponder Trump’s legislative agenda. The U.S. Secretary of Defence and the U.S. Secretary of State confirmed last weekend that the Trump administration is seeking diplomatic solutions to denuclearise North Korea, helping markets higher on Monday. The circus continued later in the week as Trump announced the dissolution of a pair of business advisory panels following a wave of high profile departures of corporate leaders after widespread criticism over the President’s reaction to violence in Charlottesville. In economic news, core inflation excluding food and energy came in at 1.7%, in line with expectations and the consumer price index climbed to 1.7%, below expectations of 1.8%. Federal Reserve minutes released this week highlighted the concerns over the surprisingly low inflation readings which could delay more interest rate hikes. Most Fed officials also wanted to wait until the next monetary meeting to unveil details on the Bank’s planned unwinding of its $4.5 trillion asset portfolio.
European markets were higher on stronger than expected UK labour market data with unemployment falling to 4.4%, and German GDP growth for the June quarter. The British pound fell to a five week low on weaker than expected consumer price inflation of 2.6%. Asian markets were mostly higher as concerns over North Korea eased.
The Australian dollar was mostly higher against major currencies this week, supported by strong labour market data and firm commodity prices. The currency however still lost a little bit of ground against the U.S. dollar despite a surge from the US78c level late in the week.