The Australian market was higher last week with the ASX 200 index grinding towards 6,000 points, a level that has not been experienced since before the global financial crisis. The Australian market followed a broad-based rally as investors continued to take an upbeat view on the outlook for global economic growth. The market was supported by the unveiling of a tax bill by U.S. Republicans that includes a permanent corporate tax cut from 35% to 20% and a consolidation in the number of tax brackets for individuals. In company news, Oil Search Limited fell after spending US$400 million to acquire stakes in several oil assets in Alaska. Myer Holdings was lower after the embattled retailer posted a fall in sales and cut its longer-term targets for earnings growth due to “heightened competition and subdued consumer sentiment”. Woolworths jumped higher after first-quarter sales results indicated that the company outpaced its key rival, the Wesfarmers-owned Coles for the third straight quarter.
In global markets, Wall Street was mostly higher with the major indices wrapping up a strong October this week as quarterly earnings results kept equities drifting near all-time highs. The Federal Reserve said economic activity had been picking up at a “solid rate” compared with the “moderate rate” it had referenced in September. The Fed’s rosier view of the economy also suggests it is on track to hike interest rates in December, as has been widely expected. After weeks of speculation, Donald Trump picked Jerome Powell as Janet Yellen’s replacement for Chair of the U.S. Fed next year. This is a signal of continuity if the Senate confirms the appointment.
European markets were higher as global equities rallied following corporate earnings results. Concerns over political tensions in Catalonia eased as the ex-Catalan President, Carles Puigdemont, agreed to a snap election. The Bank of England raised interest rates by 25bps to 0.50% in order to return inflation, which the BOE expects to peak above 3% in October, to a sustainable level.
Asian markets were mostly higher despite cautious trading ahead of Trump’s U.S. Fed Chair decision. The Australian dollar was higher against most major currencies this week except for the Euro. The British pound plunged against the Euro despite the Bank Of England’s decision to raise rates because the central bank adopted a more dovish than expected tone.