6th Sept 2019

Key points

• The US-China trade tensions intensified during August. US tariffs will be applied to all Chinese imports by Christmas at an average rate of 22% (from 14% currently). In response, China imposed tariffs of 5-25% on US$185bn of US imports and suspended purchases of US agricultural products.
• Global manufacturing data continued to come in weaker in Europe and China. US followed this theme in early September with an ISM Manufacturing print which was well below expectations.
• Despite the slowdown in manufacturing, US earnings season delivered three times as many earnings beats as misses. Guidance was less upbeat. Domestic earnings season also delivered more beats than misses though, like the US market, earnings forecasts have, in aggregate, been downgraded.
• The Reserve Bank of New Zealand (RBNZ) cut interest rates by 0.50%. A cut of 0.25% was widely expected.

Key developments

Lead economic indicators continued to weaken and uncertainty around trade negotiations dragged on during September. It was against this uncertain backdrop that global equity markets fell 2.0% (in local currency). New Zealand equities held up comparatively well, down -0.9%, with higher yielding companies faring best after the RBNZ’s surprised 50bp cut to interest rates. Australia suffered the brunt of falling commodity prices, down 2.4% (in AUD).

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