Australia’s largest telco want to build a superfast communication network across Perth. Part of that plan will be a new communication system for Perth’s rail. It will control signalling and operations. Ideally it will be designed to run the city’s driverless train network. And potentially it could all be thanks to Trump.
Talks of a possible trade war continue. At first, the mere possibility of a trade war was shocking. Now as the weeks go by, investors have become used to the tit-for-tat comments between two economic superpowers. It’s not clear that a winner has emerged. It’s not even clear if America and China will follow through on many proposed taxes.
Shanghai is a municipality in China. It is roughly 6,340km2 in size. Australia is a country and a continent in the southern hemisphere. It’s roughly 7.692 million km2 in size. You could fit just over 1,213 Shanghais inside Australia — if you could do such a thing.
US stocks didn’t do much overnight. The Dow fell a bit, while the S&P 500 increased a bit. It seems that investors are treading water, awaiting news from the Federal Reserve, which will conclude a two day meeting and reveal their decision on interest rates tomorrow, our time.
China is no longer a copycat of the West. They’re quickly becoming an innovation nation just like they’ve been saying. The government just spent US$10 billion to build a quantum lab. According to the OECD, China is now the second largest scientific powerhouse, behind the US. And as you can see, China is pumping out patents like crazy.
The threat of a trade war between the US and China has diminishing. It’s interesting to note that Trump’s continued threats seem to have forced China’s hand. Now that the threat of a US–China trade war is receding, Australia can turn its attention to more positive developments. The Australian government is hinting towards trade talks with Britain.
The stuff that’s written about why the market did this or that on a daily basis is a good example of short term narrative. Sometimes it makes sense, sometimes it doesn’t. Because the new narrative in the market is that stocks are falling due to ‘trade fears’, any rise must mean that ‘trade fears’ aren’t as bad as first thought. You saw that yesterday with Wall Street’s strong recovery.
A trade war is on everyone’s mind. Even central bankers, who usually don’t comment on such events, are talking about the dangers of such a scenario. On Friday, we also followed US stocks down as investors digested Trump’s further tariff plans. If China retaliates, investors could assume the worst. Thus, it would be reasonable to look in these industries for bargains...
What’s far more important is how investors reacted to the Fed’s outlook and their decision to increase interest rates. After the rate hike decision, US bond yields spiked, almost clearing 3%. But even before bond yields reach that 4% market, there’s one group of stocks that could fall regardless. Some believe 2018 could be the tipping point for big US tech.
It was interesting to hear Trump’s new economic adviser Larry Kudlow, say on CNBC last week that he would ‘buy king dollar and sell gold, that’s the trade that I love’. All this spending is going on not at a cycle low when government largesse is most needed. No, it’s happening right at the tail end of a historically long expansion.