“The Dow Jones Surpassing the 21,000 level…”

Australia

The Australian economy grew by 1.1% in the last quarter 2016 as a result of an increase in company profits, government and consumer spending. Gross domestic product rose by 2.4% from a year earlier. Australia’s biggest export which is iron ore, the steel making ingredient, increased into 2017 with the prices recently rising to a 2 ½ year high on optimism from Australia’s biggest trading partner China. The plan of Australia to shift investment from mining to focus more on other industries such as services has been rather slow to materialize. Investment spending by companies in the last quarter of 2016 has gone down by 2.1% much worse than the 0.5% expected by economists. Instead of reinvesting in big projects increase in profits were used to reward investors such as in the case of Rio Tinto where dividends were increased and announced a $500 million share repurchase after a turnaround from losses in previous year to a $4.6 billion profit in 2016. Similarly, BHP Billiton Ltd which is the largest miner by market value has doubled its dividend after reporting a profit of $3.2 billion in the second half of 2016. With regards to employment, Australia’s jobless rate has recently gone down with many jobs being created such as part time positions in services such as cashiers, contributing to weak wage growth and low inflation. Low interest rates at 1.5% have stirred up a boom in property leading to high level of debt. In Sidney housing prices in 2016 increased by 15% due to foreign demand and speculative buying doubling in price since 2012.

Dow Jones

The Dow Jones surpassed the 21,000 level for the first time while treasuries fell as investors are increasingly more confident of the accelerating global economic growth making it clearer that interest rates in the US will go higher. During his speech to Congress Donald Trump spoke favourably of pro-growth policies. Amongst the equities that traded at all time highs were Goldman Sacchs and JP Morgan Chase & Co. During his speech President Trump was very broad in his comments when he spoke about big tax cuts, deregulations and plans for infrastructure, however, no specific details were given. Other speakers this Friday are Chair Janet Yellen who shall address the economic outlook and on 3rd March the Chinese People’s Consultative Conference which is an advisory body of more than 2,000 political elites, business executives and others will open its session . Amongst the main movers in the market are the Bloomberg Dollar Spot Index which jumped 0.6 percent increasing for a fourth straight day and heading for the biggest advance. The Yen fell 1 percent to 113.87 per dollar (the third day of losses) while the euro fell 0.5 percent to $1.0522 and the British pound weakened to $1.2299 (0.7 percent). On the other hand, the S&P 500 index ended February with its best monthly gain climbing 3.7 percent. European stocks led the biggest gains since the beginning of February, with banks leading the way. German bonds fell with the yield on the 10 year benchmark adding 6 basis points after regional data showed inflation accelerating. French bonds are under more election risk with the yield on the ten year benchmark rising two basis points to 0.91 percent. This has arisen because Francois Fillon the republican candidate will stay in the presidential race diverting votes away from Emmanuel Macron who is the favourite to beat Marine Le Pen.

China

On Wednesday the labour minister said that China will be cutting another 500,000 steel and coal jobs this year to reduce excess production capacity in view of complaints that the industries are flooding global markets and putting down prices. Production which is exceeding demand for steel, coal, cement, aluminium and gas has resulted in low-cost exports on which the US and Europe are complaining they are hurting foreign competitors and having a negative impact on thousands of jobs. In this regard, Beijing has launched efforts to shrink these industries.

EU

Core inflation in the EU that excludes volatile elements such as energy was unchanged for the third consecutive month in February at 0.9 percent. The increase in oil prices have been pushing inflation up across the EU, in such areas as Germany, Spain and Italy. When compared to the same month last year, consumer prices increased 2 percent in February, while in January the increase was of 1.8 percent. The differences between the two inflation indicators shows how difficult it is for the ECB to choose the right monetary stimulus. Whilst the headline inflation is moving in line or close to the 2 percent target the persistent weakness in core inflation is of concern to EU officials including ECB president Mario Draghi. According to Eurostat the unemployment rate in the Euro area was unchanged in January at 9.6 per cent which is the lowest since May 2009.

External issues such as the policies under the Trump administration, Brexit and the elections in core member states of the EU that is France, Germany and the Netherlands are all factors that contribute to the economic outlook according to ECB president Mario Draghi.

Japan

Japan’s output fell unexpectedly in January for the first time in six months, resulting from a slowdown in exports of cars to the US. Data by the Ministry of Economy, trade and industry on Tuesday 28th February showed that industrial output fell 0.8 percent in January (market forecast was 0.3 percent). This is the sharpest decline since May 2016 and the outlook does not look very cheerful as output is expected to rise 3.5 percent in February and then decrease by a 5 percent in March. Japan’s economy grew with an annualized 1 percent in the fourth quarter 2016 slowing from a 1.4 percent in the third quarter.

Other

9th March: Meeting of EU Governing Council

‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’