NZ sharemarket bides time while Australia’s shrugs off the war of words with China to keep on rising.

Wall Street bets on stimulus package
Oil, Bitcoin and European markets rise
Britain and Europe seek late deal
HP moves out of Silicon Valley

The NZX50 will open today a touch down on last week at 12,631. The strong dollar held export stocks in check and there was no significant company news to inspire investors. A strong Australian dollar didn’t hold back Aussie shares in the same way and the ASX 200 rose for the fifth straight week in a row, closing at 6634.

Despite the escalating economic war with China, Australian data shows the country is emerging from recession and benefiting from the re-opening of global trade.

Another factor helping Australia is China’s reluctance to cut imports of iron ore as it stimulates its steel intensive construction sector following the coronavirus downturn.

Iron ore accounts for half of Australia’s exports to China and the price per tonne hit a seven year high last week.

Wall Street bets on stimulus package

Share markets in the US rose after reports Democrats and Republicans in Congress are getting closer to agreeing on a US$908 million stimulus bill.

The pressure on both sides to do a deal increased after the November jobs report showed jobs added in the month (245,000) was well below the estimated 440,000. CNBC reported this was the smallest gain since the jobs recovery started in May.

The S&P500 index gained 2.3 percent to close at 3638 with the tech stocks – Facebook, Netflix, Alphabet and Tesla – all rising.

Bulls, it seems, continue to outnumber the bears in the US. A key survey of financial advisors showed bullish sentiment to be the highest since January.

Oil, Bitcoin and European markets rise

Oil prices rose for the fourth week in a row with Brent Crude up 46 cents at US$48.71 a barrel – the highest since March.

The market was responding to the OPEC+ group’s decision to gradually increase production after December to avoid a supply glut at a time when the global recovery from the pandemic remains uncertain.

Production will increase by an initial 500,000 barrels per day in January and be reviewed on a month by month basis. Oil prices remain more than 25 percent lower than a year ago.

In Europe, Investors were encouraged by the OPEC+ announcement, the prospects of a US stimulus the package and a last minute Brexit deal.

The pan-European Stoxx 600 edged up 0.6 percent, with shares in oil and gas companies leading the way.

Markets are buoyed by the progress on vaccines. Pfizer and BioNtech say they will roll out 1.3 billion vaccine doses in 2021 and Moderna reported last week it expects to supply up to 125 million doses of its experimental vaccine in the first three months of next year.

The promising news on vaccines has seen gold lose some of its shine. The price has dropped by nearly 6 percent since the first vaccine trials were announced and closed at US$1840.36 on Saturday.

Bitcoin dropped 2.4 percent to end last week at US$19.212. The crypto-currency is up nearly 30 percent this month. Back in March, Bitcoin was trading under US$6,000.

Britain and Europe seek late deal

Britain and the European Union sought on Sunday to strike an elusive trade deal, with failure likely to end with trade in chaos, markets tumbling and a huge economic price to pay, Reuter reports.

Overnight Britain would lose zero-tariff and zero-quota access to the European Single Market of 450 million consumers.

Britain would default to World Trade Organisation (WTO) terms in its trade with the 27-state bloc, making it in effect as distant to its biggest trading partner as Australia.

Britain would impose its new UK global tariff (UKGT) on EU imports while the EU would impose its common external tariff on UK imports. Non-tariff barriers could hinder trade, with prices predicted to rise for consumers and businesses.

The EU is Britain’s biggest trading partner, Reuter reports, accounting for 47% of its trade in 2019. It had a trade deficit of 79 billion pounds (US$106 billion) with the EU, a surplus of 18 billion in services outweighed by a deficit of 97 billion pounds in goods.

A no-trade deal would wipe an extra 2 percent off British economic output in 2021 while driving up inflation, unemployment and public borrowing, Britain’s Office for Budget Responsibility (OBR) has forecast.

HP moves out of Silicon Valley

Hewlett-Packard Enterprises, a descendant of the company whose early success in Palo Alto, Northern California, sparked the district’s technology hub which later became known as Silicon Valley, is moving to Texas.

CNN reports a number of tech companies are making the move south, some for tax reasons and others as firms respond to the pandemic and its potential for new ways of working including smaller offices and the trend to working from home.

An area of Austin, Texas, has been nicknamed ‘Silicon Hills’ because of the cluster of high tech companies now located there.

HP Enterprises’ existing location in Texas is in Houston and it will build its new campus in that city.

Mark Jennings is co-editor of Newsroom.

Leave a comment