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The biggest story of this week in my view hasn’t got much to do with Australian or US equities, and everything to do with forward-looking geopolitics.
If that isn’t your cup of tea, I apologise – jump straight ahead to the list of headlines that caught my attention this week.
But what’s happening with China-European relations is worth recapping this week.
Three weeks ago, German Chancellor Olaf Scholz indicated that his government had no real issues doing trade with China; that German-Chinese relations were sound, and that the two nations will continue to do trade.
Fast forward to this week, and France’s Emmanuel Macron said something similar, calling for a “reset” of ties with the largest Asian economy (and Australia’s largest trading partner.)
Notably, Macron invited Xi to a region of France near the Spanish border where Macron reportedly spent time as a child – a tip of the hat to 2023, when Jinping brought Macron to his father’s residence in Guangdong.
So, off the bat, we’ve seen evidence of a warming relationship between two of the largest EU economies in the last month; both Australian allies. But it isn’t just Germany and France.
Xi Jinping then went on to Serbia and Hungary – Serbia’s President Aleksandar Vučić has asked the Chinese leader to visit his nation dozens of times in recent history, according to an english-language propaganda channel called ‘Xi’s Moments’ on facebook.
Certainly, footage of the two leaders communicating face-to-face showed a beaming Vučić.
Overnight, China and Hungary signed a series of new agreements after Xi visited Hungarian Prime Minister Viktor Orbán. The two men celebrated a ‘new era’ of relations between the two countries.
Hanging over all of this of course is the question of China’s relationship to Russia, still carrying on its invasion of Ukraine.
And while government spokespersons in the relevant European countries might be enthusiastic to note those discussions definitely came up (perhaps while sight-seeing,) it appears Xi Jinping’s charm offensive itself was the bigger story than that of being grilled.
The real signal here is Germany’s welcome to China back in Week 16. Germany is the EU’s largest economy, and while not part of AUKUS, clearly one of Australia’s allies in the region (despite relative isolation from one another.) Spend one night at a backpackers’ hostel if you need proof of that.
Interesting times. If developed European nations start taking a warmer tone – will that force Canberra to soften? (And what about Biden?)
Food for thought: the spectre of microchips looms over all.
Australian Equities
- Big 4 banks share buyback programs bring into question limited growth prospects
- UBS sees ASX200 at 8,000 by EOY; VanEck go higher at 8,300
- ASX investors’ full year earnings expectations are too high: Goldman Sachs
- Westpac profits drop -16% but not more than expected, sparing shares
Australian Economy
- Australia job ads increased +2.8% in latest ANZ bank data…
- But Seek ads plunged -18.6% YoY in April; -4.7% MoM
- RBA keeps rates on hold; Oz retail prices rose 0.6% in Q1 CY2024
- Westpac expects a soft landing; ANZ still sees a RBA rate cut in November
International Equities
- Warren Buffet sells 13% stake in Apple
- Match Group reports spending is falling on dating apps broadly
- Reddit’s share price jumps 15% on first earnings report; forecasts strength
International Economies
- Panama Canal authority to make advance booking for ships permanent: S&P
- Panama Canal drought situation appears to be repairing; water levels back by 2025
- Slowing US jobs growth taken as sign of rate cut optimism
- Chinese business sentiment jumps slightly in latest data: Caixin
Commodities
- OPEC to extend oil production cuts in June of 2024
- Iron ore prices at port of Tianjin up more than 15% MoM
Geopolitics
- Xi continues European charm campaign in France, Hungary and Serbia
- Macron calls for reset of China relations weeks after German ties reiterated
- Israel raids Al Jazeera’s Jerusalem offices days before Rafah attack
