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September Market Update 2018

admin — Fri, 14 Sep 2018 00:03:08 +0000

The Pulse

Trade tensions between the US and China are still a source of significant uncertainty for financial markets.
Political risks and trade uncertainty have seen a vicious cycle of selling in emerging market currencies as investors react to contagion fears.
US shares rose in August on the back of positive company earnings results, while European economic data was soft.
Australia recorded GDP growth of 3.4% year-on-year—the fastest rate since 2012 during the height of the mining boom.
On the Brexit front, the biggest stumbling blocks remain the Irish border plan and the UK’s post-exit trade relationship with the EU.

Global economies

Fears of emerging market contagion have so far been confined to currency markets, with major falls in the Turkish lira and Argentine peso. Trade tensions are still a source of uncertainty, especially among US and Asian manufacturers, but so far the impact on the real economy has been muted. The US growth story was strengthened with an upward revision to GDP and strong jobs numbers, while in Europe growth and inflation remain soft.

The US economy is growing at a solid rate and employment continues to build, but inflation expectations are still largely unchanged and wage growth, while showing some promising signs, remains stubbornly low despite labour market tightness. Trade tensions between the US and China are causing significant uncertainty for manufacturers, but so far demand is holding up well, as evidenced by August’s expansion in new orders.

Europe

In Europe, economic growth is maintaining momentum but is largely disappointing in absolute terms, while inflation remains weak and is forecast to remain below target over the next three years.

China

China’s headline GDP for the June quarter showed a steady growth rate at 6.7%, but growth in the first half of the year has moderated to 6.4%, with a decline in investment spending being the driving force. The ongoing crackdown on credit growth in the shadow banking sector has been a key factor behind the downturn in investment and the state-owned enterprise sector, while the consumer and services sector has now become the major contributor to growth.

Asia Region

Japanese GDP grew by 0.5% in the June quarter or 1.9% annualised, recovering from a contraction of 0.9% in March. This means the economy has grown by a meagre 1.0% over the year, although conditions appear to be improving, led by solid growth in investment and promising signs in inflation and wage growth.

Australia

Australia’s economic growth was a stronger-than-expected 0.9% for the June quarter and 3.4% year-on-year—the fastest growth since 2012 during the height of the mining boom. Growth was boosted by a 0.7% rise in consumer spending, despite headwinds from low wage growth and falling house prices. The June figures compare favourably to the 2.9% growth for the 2017-18 financial year, as well as the RBA’s estimate of just over 3.0% for 2018 and 2019.

The information contained in this Market Update is current as at 13/09/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

Any advice in this Market Update has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.

Past performance is not a reliable indicator of future performance. Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

August Market Update 2018

admin — Thu, 13 Sep 2018 04:54:48 +0000

The Pulse

US economic growth shot to an annualised 4.1% in the June quarter but the market is questioning whether this is sustainable.
The impact of US and Chinese tariffs has been noticeable in Asian export growth but US manufacturing activity is yet to be hit hard.
In Australia, the RBA continues to keep rates on hold with tighter credit conditions and lower house prices constraining the household sector.
Japan’s economy likely returned to growth in the June quarter, with wage growth helping to alleviate deflationary pressures.
The UK is heading towards a ‘hard’ Brexit, with the EU rejecting Prime Minister May’s proposed customs plan.

Global economies

Uncertainty surrounding the global trade environment and concerns about the sudden rise of protectionist policies remain at the forefront of the economic narrative, but for now equity markets are focused on positive fundamentals. While financial market volatility has been constrained in recent months, there is a risk of higher volatility in the second half of 2018.

The US economy continues to power ahead in the face of geopolitical and trade tensions, but it remains to be seen if this is sustainable. US June quarter GDP shot to an annualised 4.1% according to the first estimate reading, which was in line with expectations, but based on factors that could prove temporary, including the impact of income and company tax cuts.

Europe

Despite improved labour market flexibility and ongoing structural reform, the eurozone economy is yet to show signs of sustained growth. According to a preliminary estimate, GDP growth across the euro member countries was 2.1% year-on-year at end June, down from 2.5% in the March quarter and continuing to pull back from the higher rates of growth seen in 2017, which were underpinned by strong export performance.

China

The latest round of Chinese data provides evidence of a further slowing in manufacturing activity, while the services sector is lifting its contribution to growth. The June quarter GDP data showed economic growth easing back to 6.7%, with the services sector growing by 7.6%, highlighting the evolution of the Chinese economy.

Asia Region

In Japan, manufacturing and services PMIs indicated a moderate slowing in activity, with the headline Business Activity Index falling 0.1 points to 51.3. Japanese exports rose 6.7% in June, but exports to the United States—Japan’s largest trading partner—fell for the first time in 17 months in signs that the US-China tariff war is starting to have some spillover effects in neighbouring markets.

Australia

Given the risks within the household sector, the RBA is happy to sit on the bench, holding rates at 1.50% at its August meeting. While household debt and sluggish wage growth remain a concern, the business sector is enjoying favourable conditions, especially in the manufacturing, construction and business services industries.

The information contained in this Market Update is current as at 13/08/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

July Market Update 2018

admin — Tue, 24 Jul 2018 03:06:02 +0000

The Pulse

US core consumer prices lifted in line with the Fed’s 2% inflation target, vindicating June’s rate hike.
Slowing credit growth and infrastructure spending is pointing to softer Chinese growth for the June quarter.
Australia’s labour market continues to tighten, but employment growth and hours worked have lost momentum and wage growth is subdued.
US tariffs on US$34 billion worth of Chinese goods came into effect in early July, with China responding in kind with tariffs on key American exports.
European political tensions are on the rise, with the UK’s Brexit plan resulting in ministerial resignations and Italy’s budget likely to delay deficit reduction.

Global economies

The synchronised global growth story has found itself under threat from escalating trade tensions, European political risks, and a slowing Chinese economy. These risks emerge in the context of tightening monetary policy globally, as inflation slowly moves higher in line with central bank targets. Despite labour market tightness, wage growth is not yet sustainable and household sectors remain exposed.

The US March quarter GDP was lower than previously estimated, weighed down by the weakest consumer spending in almost five years. June’s third estimate reading showed growth at an annual rate of 2.0%, down 0.2 points on the previous estimate. While Trump’s $1.5 trillion tax cuts are expected to provide a boost to consumer spending in the June quarter, the tit-for-tat tariff war with major trading partners—including China, Canada, Mexico and the EU—could prove a drag on growth, putting pressure on supply chains and possibly undercutting business investment.

Europe

Headline inflation in the eurozone rose from 1.9% to 2.0% in June, although this was due mostly to an 8.0% rise in energy prices. Underlying price pressure remains weak, with the core CPI falling from 1.1% to 1.0%.

China

China’s economy continues to show signs of fatigue, with slowing credit growth and infrastructure spending pointing to softer economic growth for the June quarter. June’s official PMI figure showed a further loss of momentum in the manufacturing economy, falling from 51.6 to 51.5, while industrial production also fell 6.9% to 6.8% year-on-year.

Asia Region

Revised GDP data confirmed that the Japanese economy shrank by an annualised 0.6% in the March quarter, putting an end to eight consecutive quarters of growth. This places Japan at risk of a technical recession (defined as two consecutive quarters of negative growth), and while the contraction was caused by temporary factors, a strong rebound appears unlikely.

Australia

Australian economic growth is on a sound footing, supported by a bounce in global growth, a strong commodities sector, and improved business and public sector investment. However, while there has been a surge in employment and hours worked over the past year, momentum has slowed from 2017’s pace, and wage growth remains subdued at around 2.0%.

The information contained in this Market Update is current as at 12/07/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

June Market Update 2018

admin — Tue, 24 Jul 2018 03:03:28 +0000

The Pulse

Inflation continues to creep higher and is close to or at 2% in major developed markets, although core measures of inflation remain below target.
Despite slower-than-expected March-quarter growth in the US, there are signs of a stronger June quarter, including improved consumer spending and business investment.
Tariff threats between the US, China and Europe are yet to be resolved and risk escalating into a trade war that could damage global trade.
In Italy, the political impasse was finally broken, with a coalition government formed between the two popular right parties, Lega Nord and the Five Star Movement.
Japan’s economy contracted in the March quarter, bringing into question the efficacy of the Bank of Japan’s quantitative easing measures.

Global economies

Geopolitical tensions, including an ‘on-again, off-again’ tariff war between the US, China and Europe were the cause of uncertainty for markets through May. The US and China agreed to a ‘trade war hold’ before tariff threats re-emerged once again from the US, culminating in June’s heated G7 meeting. Globally, inflation continues to inch higher, with renewed pressure on central banks to tighten rates, while data points to stronger economic growth for the June quarter.

US March quarter GDP was revised down 0.1 points to an annualised 2.2% according to May’s second estimate reading, missing against the expected reading of 2.3%. Despite the slower-than-expected growth, there are signs of a stronger June quarter, including improved consumer spending and business investment.

Europe

Concerns over slowing world trade growth and rising geopolitical tensions, together with extreme weather conditions, have combined to undermine economic activity across the European continent. The spectre of a trade war with the US also places major European economies in an uncertain position.

China

While China’s March quarter GDP growth was a promising 6.8% year-on-year, indicators of manufacturing output growth and business investment remain subdued. China’s official manufacturing PMI rose in May from 51.4 to 51.9, indicating a modest improvement in growth, however the unofficial Caixin PMI, which measures output from smaller firms, was steady at 51.1.

Asia Region

June’s flash March quarter GDP reading confirmed that Japan’s longest run of economic expansion since the 1980s has come to an end, with output contracting -0.6%. The result is a serious blow to Prime Minister Abe’s reflationary policies and the Bank of Japan’s ultra-easy monetary policy.

Australia

The Reserve Bank of Australia (RBA) left the cash rate anchored at 1.5% at its June meeting, and judging by the most recent Statement on Monetary Policy, it is unlikely to change course any time soon. Ongoing low wages growth, uncertainty over the extent and impact of the recent tightening in home lending conditions, and inflation barely in the bottom of the RBA’s target range suggest that it would be premature to begin exiting current accommodative policy settings. However, the broader economic picture remains robust.

The information contained in this Market Update is current as at 19/06/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

May Market Update 2018

admin — Fri, 13 Jul 2018 06:20:09 +0000

The Pulse

The global economy lost some momentum in the March quarter, but fundamentals remain robust.
US core inflation measures are rising, which is flowing through to longer-term expectations and pushing yields higher.
The threat of a trade war between the US and China continues to be a source of significant uncertainty for markets.
Australians will receive cuts to income tax as anticipated, while public infrastructure spending should help bring the economy closer to capacity.
Inflation in the euro area remains sluggish, with core inflation falling sharply from 1.0% to 0.7% in April.

Global economies

The March quarter saw some slowing of momentum, partly due to temporary factors but compounded by concerns over a possible trade war between the US and China. Inflation expectations showed signs of firming, pushing yields higher through April, while a narrowing of the LIBOR-OIS spread helped calm the market’s nerves. Fundamentals remain supportive of growth through 2018 and 2019, with inflation expected to rise as labour markets continue to tighten.

March quarter growth was an annualised 2.3%, indicating a slowing in activity over the December quarter. Partly weather-affected, consumer spending growth weakened to 1.1%, while manufacturing activity peeled off from extremely high levels. Headlines have been dominated by announcements of further tariffs, raising fears of a trade war, while markets have been watching interbank funding costs for signs of financial system stress.

Europe

Inflation in the euro area remains sluggish, with the CPI falling to 1.2% in April, down from 1.3% in March, while core inflation fell sharply from 1.0% to 0.7%. The ECB still believes inflation will rise to 1.7% by 2020, with oil prices expected to lift the headline rate in coming months.

China

Economic data for the early part of 2018 suggests the economy has slowed marginally after the better than expected growth in 2017. The March quarter GDP may have come in at a steady 6.8%, but PMI indicators of manufacturing activity still appear weak, while investment spending also continues to soften.

Asia Region

Japan’s manufacturing sector expanded at a faster pace in April, with the Nikkei Japan Manufacturing PMI rising from 53.1 to 53.8 amid improved growth rates in output and new orders. The services sector also recorded a boost, rising at the fastest pace in six months, with improved demand allowing service providers to lift prices.

Australia

In a decision that undoubtedly surprised very few, the RBA left the cash rate on hold at 1.50% at its May meeting, making this the longest spell of inactivity since 1990. While there was no discernible shift in rhetoric, the Bank noted that inflation is moving in line with expectations, sitting just below the target 2% rate. While inflation is still below target nationally, the ABS notes that the east coast is generally experiencing inflation in excess of 2%, boosted by the Housing and Food groups.

The information contained in this Market Update is current as at 18/05/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

April Market Update 2018

admin — Mon, 16 Apr 2018 06:50:53 +0000

The Pulse

The global economy is maintaining momentum and inflation is gradually moving higher in line with central bank targets.
Growth in US average hourly earnings is still not showing conclusive evidence of a sustained pickup in wages.
The threat of a trade war between the US and China is creating significant uncertainty for markets.
Euro area inflation was 1.4% in March, up from 1.1% in February but still well below the ECB’s target.
The Australian economy continues to improve, but the RBA is wary of the impact of interest rate rises on the household sector.

Global economies

While underlying economic data is broadly positive, markets remain concerned about the prospect of inflation as well as the potential for a trade war between the US and China. Shares continued to sell off in March as investors favoured bonds, property and defensive sectors. The US economy is maintaining momentum and measures of underlying price inflation are gradually moving higher, but signs of imminent wage inflation have not yet materialised.

The prospect of a trade war has been the cause of some consternation for markets over the past month, with China announcing a retaliatory 25% levy on a range of US products, including soybeans, cars and whiskey. While US steel and aluminium hardly represent the new economy, it is the response from US trade partners that poses the greatest uncertainty.

Europe

Despite stronger than expected growth throughout the eurozone, the ECB kept its key interest rates on hold in March, although notably dropping its usual commitment to increase the size of quantitative easing if the situation deteriorates.

China

Economic data for the early part of 2018 has been mixed, with manufacturing PMIs failing to break out of the low 50s, while exports, industrial production and retail spending data have surprised on the upside.

Asia Region

Although headline GDP growth numbers in Japan have been low in absolute terms, by Japanese standards they have been solid, resulting in a narrowing of the output gap. Japan’s Q4 GDP growth of 1.6% year-on-year is the 16th quarter of positive growth, but there have been a number of misses along the way.

Australia

Despite leaving the cash rate on hold at its March meeting, the RBA continues to expect labour markets to tighten globally, and for central banks to get on the front foot by withdrawing stimulus. In its statement, the RBA mentioned the market’s concerns about US trade policy and its contribution to heightened volatility. The RBA and Treasury both expect GDP growth to be in excess of 3% over the next two years, but monetary policy is still extremely accommodative.

The information contained in this Market Update is current as at 16/04/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

March Market Update 2018

admin — Wed, 14 Mar 2018 03:01:59 +0000

The Pulse

Perhaps paradoxically, February’s market turmoil was a response to signs that the global economy is reducing slack.
US employment and wage indicators led investors to take a more “inflationist” view, with a rise in yields pre-empting future Fed tightening.
Price pressures in Europe also appear to be picking up, with PMIs pointing to stronger economic growth in Q1 2018.
The Chinese economy appears to be stuck in neutral, with mixed PMIs and inflation falling to 1.5% year-on-year.
The Australian economy continues to improve, but wages growth remains subdued and the RBA is unlikely to raise rates in the near term.

Global economies

The market’s attention has turned to the outlook for inflation, and the potential for central banks to respond with tighter monetary policy. The resultant rise in bond yields, together with a reassessment of equity market valuations, gave way to February’s market pullback. Economic indicators are robust, but anticipated interest rate moves are a key determinant for markets.

With the US unemployment rate falling to 17-year lows, the expectation of both policymakers and investors is that wages growth will eventually pick up, and with it inflation. January data provided evidence that the US economy may be starting to run up against some capacity constraints.

Europe

Growth in the eurozone continues to surprise on the upside, with GDP rising 0.6% in the December quarter, bringing year-on-year growth to 2.7% (which is significantly higher than what economists were predicting at the start of 2017). It is even possible that the 0.6% figure may be revised higher in line with recent trend revisions.

China

China’s February PMI readings were mixed, with the official index down to 50.3 from 51.3 and missing expectations, while the Caixin PMI moved slightly higher from 51.5 to 51.6. Industrial production growth in December was 6.2%, which narrowly beat consensus, while private investment was subdued at 7.2% and retail sales growth eased to 9.4% from 10.2%.

Asia Region

Japanese GDP rose by a disappointing 0.1% in the December quarter, slowing from a 0.6% rise in the previous quarter, however this is the eighth consecutive quarter of growth. On a positive note, the Nikkei Japan Services PMI indicates increased strength in the manufacturing sector, with new business opportunities increasing at the fastest rate in four years.

Australia

The outlook for Australia continues to improve, with unemployment expected to approach 5% over coming years and wages growth to pick up modestly. Australia’s labour market continues to tighten, with 16,000 seasonally adjusted jobs added in January. The past 12 months have seen the participation rate grow steadily, from 64.8% to 65.6% in trend terms—close to historic highs and back to pre-GFC levels. From a monetary policy perspective, this outlook suggests that while the next move in cash rates is likely to be up, there is little urgency.

The information contained in this Market Update is current as at 13/03/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

February Market Update 2018

admin — Wed, 14 Mar 2018 02:59:20 +0000

The Pulse

The global economy is benefiting from a broad-based, cyclical recovery, supported by higher levels of investment and accommodative monetary policy.
The US economy ended 2017 on a slightly shaky footing, although the overall employment situation continues to improve and the bond market is anticipating further rate hikes.
Growth in Europe continues to surprise on the upside, supported by rises in private consumption and business investment.
The Chinese economy slowed marginally in the December quarter, with GDP growth falling to 6.8% and PMI figures lower than expected.
The Australian economy continues to improve, although weaker than expected inflation all but scuppered the chance of a February rate hike.

Global economies

The start of 2018 saw a moderation in economic data from major developed markets, although business investment and favourable employment conditions are providing a solid foundation for growth. While inflation remains below target in advanced economies, central banks have begun the process of gradually tightening monetary policy.

The US economy ended 2017 on a slightly shaky footing, with the first estimate of Q4 GDP recording growth of 2.6%, slowing from Q3’s growth of 3.2% and lower than the market’s anticipated 3.0%. Imports, which subtract from GDP growth, increased at their fastest rate in more than seven years, highlighting the challenge facing the Trump administration in achieving its 3.0% growth target.

Europe

Euro area GDP grew by 0.6% in Q4 (2.7% year-on-year), slightly lower on Q3’s growth of 0.7% (2.8% year-on-year). Recent survey data shows that manufacturing is growing at the fastest rate in over two decades, while the services sector enjoyed its best year since 2007. Major European shares leapt to record earnings early in 2018, despite a rising euro and falling US dollar.

China

The Chinese economy slowed marginally in the December quarter, with GDP growth falling to 6.8% after averaging 6.9% in the first three quarters of 2017. A clampdown on factory pollution, a further lift in borrowing rates, and tighter financial conditions in the shadow banking sector are likely to have dampened growth.

Asia Region

In Japan, Q3 GDP growth was revised up to an annualised 2.5% from a preliminary estimate of 1.4%, and just shy of the 2.6% recorded in Q2. The main drivers of growth were corporate investment and net exports, offset by a contraction in domestic consumption. Inflation is estimated at 0.7% for fiscal year 2017, and 1.1% for 2018. Consumer prices are still lagging in an economy that appears to be growing at a steady pace, thwarting the Bank of Japan’s attempts to achieve its 2% inflation target.

Australia

The economic outlook for Australia has improved in recent months with evidence of a recovery in business investment now complementing the very strong labour market and business conditions data. The RBA’s February monetary policy statement was undeniably more bullish compared to its December release, but nevertheless the board opted to keep the cash rate on hold at 1.50%, with inflation still low but expected to move higher.

The information contained in this Market Update is current as at 14/02/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

January Market Update 2018

admin — Wed, 14 Mar 2018 02:56:07 +0000

The Pulse

As was strongly anticipated by the market, the US Fed lifted the funds rate to 1.5% in mid-December.
The US economy appears to be operating near capacity, with an unemployment rate of just 4.1% and an underemployment rate of 8% – the lowest since 2006.
The recovery in Europe continues to defy expectations, with no sign of confidence diminishing despite political uncertainty in Germany and Spain.
The Chinese economy has also exceeded expectations in 2017, expanding by just under 7% in the first three quarters.
The Australian economy is being impacted by weak wages growth, but December saw an encouraging jump in consumer sentiment.

Global economies

December saw positive economic news from major developed markets, with rising levels of business sentiment and favourable employment conditions providing a solid foundation for growth. While inflation remains below target, central banks have begun the process of gradually tightening monetary policy as labour market conditions continue to improve.

In the United States, the final estimate of Q3 GDP indicated real growth of 3.2%, which is slightly lower than the second estimate reading of 3.3% but still growing at its fastest pace in more than two years. Growth in consumer spending, which accounts for more than two thirds of the economy, was revised down 0.1 points to 2.2%.

Europe

Growth across the 19 eurozone countries has improved steadily over the past year, and the recovery has also become more broad-based, both across different countries and sectors. In December, the European Central Bank made a significant upgrade to its 2018 growth forecast for the euro area, lifting its expected annual growth rate from 1.8% to 2.3%, while the outlook for inflation also moved higher from 1.2% to 1.4%.

China

Recent Chinese data indicates a slight loss of momentum in recent months. Although China’s official PMI picked up to 51.8 from 51.6, the Caixin PMI dropped to its lowest level in five months. Measures of industrial production and investment also appear to have softened, while policy tightening has focussed on the property sector.

Asia Region

Australia

While there was no monetary policy meeting of the RBA in January, December’s minutes revealed the board’s continued ambivalence towards domestic conditions. Wages remain stable at a low rate, despite the 3.3% increase in awards and minimum wages in the September quarter, and this appears to have impacted household spending.

The information contained in this Market Update is current as at 21/01/2018 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

December Market Update 2017

admin — Wed, 14 Mar 2018 02:53:58 +0000

The Pulse

The global economy continues to generate synchronised growth and markets are expecting these conditions to continue into 2018.
In the US, both houses of Congress have approved bills to reform and lower corporate and personal taxes paving the way for new tax laws in coming months.
In Europe, business conditions are at 16-year highs suggesting that the Eurozone can continue to generate above-average economic growth.
In China, regulators continue to try to reign in credit growth and curb speculative investment.
The Australian economy is being impacted by weak wages growth which is leading consumers to rein in spending.

Global economies

Economic news over the past month has confirmed that the major economies are continuing to enjoy relatively healthy growth in the second half of 2017 with falling unemployment and robust business and consumer sentiment surveys suggesting that current economic conditions can continue into next year.

In the United States, separate tax reform bills were passed in both the House of Representatives and Senate, paving the way for tax cuts for both companies and individuals assuming that the two bills can be reconciled. For major companies, the headline tax rate is expected to fall from 35% to 20% and, all else being equal, this should boost corporate earnings, but risks saddling the economy with higher levels of government debt if the tax cuts don’t stimulate higher economic activity.

Europe

In the Eurozone, the economy continues to perform strongly with retail sales growing 3.7% year-on-year, reflecting recent strong consumer sentiment readings. The purchasing manager surveys for the Eurozone have also continued to strengthen with the composite PMI index at a new cyclical high in November suggesting that the Eurozone economy should be growing at about a 3.5% year-on-year, higher than last quarter’s 2.5% growth rate.

China

Chinese activity data slowed more than expected in October and business surveys in November have also pointed to slower activity. The slowdown appears to relate to government efforts to close capacity in the metals sector to help reduce pollution.

Asia Region

In Japan, the preliminary estimate of quarterly real GDP growth slowed to 0.3%, marginally below expectations. This was the seventh consecutive positive quarter for growth and was enough to boost annual growth from 1.4% to 1.7%, which is above the Bank of Japan’s estimate of potential growth (of just 0.5-1.0%).

Australia

In Australia, the economy grew slightly less than expected, expanding 0.6% in the September quarter with household consumption growth particularly weak. This was likely linked with the weak wages growth which rose only 0.5% over the quarter despite the increase in the minimum wage in July. However, the economy continues to generate strong jobs growth and with business conditions at elevated levels the robust employment conditions should continue into next year.

The information contained in this Market Update is current as at 12/12/2017 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.