Global markets were lower overnight as investors returned from a holiday weekend on a sour note as the trade stand-off between the US and China continues.
Further, US stocks fell as data showed US factory activity shrank for the first time since 2016 in August, which also saw US 10 Year Treasury yields fall below 1.5%. The reading joins a slew of weak numbers produced by factory gauges across the globe, and boosted bets on deep interest rate cuts by the US Federal Reserve this year. September has begun with a rocky start for risk assets as traders remain sensitive to the twists and turns of the Sino-US trade war, and the first big economic data of the month reminding investors the global economy remains on shaky ground partly as a result.
Closer to home, the Reserve Bank of Australia kept interest rates at historic lows of 1.50% on Tuesday, despite weaker-than-expected growth and global trade fears. Traders took heart at the no-change call and commentary from Reserve Bank governor Philip Lowe noting "further signs of a turnaround in established housing markets, especially in Sydney and Melbourne".
Stock in Focus: BHP Billiton (BHP:ASX)
BHP has been under pressure of late, after its $US9.4 billion underlying profit came in below most analysts' expectations last month. The mining giant announced it will pay a final dividend of US78¢, ensuring a record full-year dividend of $US2.35 per share. The price of iron ore has also retraced, while the China-US trade war is depressing investor sentiment.
We have been positive on BHP for some time now as our top mining sector pick, and continue to see BHP as a high-quality way to play the resource sector given its scale and diverse commodity production base.
We currently have a BUY recommendation on BHP.
Members should look out for a full update on BHP to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was a touch lower on Tuesday (ASX 200 Index -0.09%) as the market digested the latest announcement from the RBA.
Afterpay has a new competitor – Latitude Financial’s new buy-now, pay-later service with Harvey Norman, LatitudePay, will allow approved customers to pay for goods <$1000 in 10 instalments. Like Afterpay, it's free for customers who pay on time. But it's being pitched as a cheaper option for merchant; no fee for transactions <$250, and ~2% of the cost of goods for amounts above that up to $1000. Afterpay charges ~5% of the cost of goods sold, for mostly small purchases.
The New Zealand market surged yesterday (NZX 50 Index +1.43%) on the back of a massive jump in the gentailers with the likes of Meridian & Contact Energy leading market gains, up +5%. Vodafone NZ and new partner Kogan Mobile have unveiled significantly cheaper prepay mobile services, which will rival smaller brands Skinny and 2Degrees. However, to get the cheapest prices, users mostly have to pay a year in advance.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- The Reserve Bank of Australia maker an interest rate decision on Tuesday.
- Escalating geopolitical tensions between Hong Kong & China & Brexit are also creating nervousness.
Have a Great Day,