The UK has joined the rate rise club. It is a select few countries that feel confident enough about the economic outlook to move to normalise rates. Canada and the US are the two front runners but not wanting to be left out the Bank of England (BOE) has ticked rates up for the first time in a decade. It was a widely expected move and not because of the confidence in the economy but as a defence against rising inflation. The biggest issue with having a currency that has been trashed, is that it imports inflation. Let’s not be concerned about the threat of Brexit. That is not something bankers can factor in, but they can factor in the inflation genie. Most central bankers and economists are well versed in the joys of rising inflation. Everyone wants a little but just not too much. It is a delicate balancing act. The problem the bank has is that it acknowledged that any further rises in rates would be glacial. Much like in the US. Sterling got hit again. This was not part of the plan. Makes that UK holiday a little cheaper and obviously at least for the time being not so attractive for ASX listed companies with UK exposure. Interestingly the BOE also published its potential growth numbers last night as well. 1.5% per annum. Much lower than the 2-2.25% pre GFC. Not all oranges and sunshine. In its statement, the BOE said it expects annual inflation to be around its 2% target in three years provided interest rates rise gently in line with investors’ expectations. Short-term rates in financial markets imply that investors believe the bank will raise interest rates twice over the next three years, to reach 1% by the end of 2020.

In Brexit news the UK and its EU friends are set to reopen divorce settlement talks on November 9th/10th. In theory the UK will leave the EU in March 2019. Time is slipping away to get this done.

MEDIA LANDSCAPE

Media reforms were widely expected trigger a raft of mergers between the players. Not so. Silence since. Crickets. After years of speculation about who will jump into bed with whom, we have seen nothing happen at all. The biggest deal is the takeover of TEN by CBS which according to Kerry Stokes at the Seven West Media AGM has caused media companies to wait and see how things shake out. Nine has talked to FXJ.SWM has talked with FXJ too. Yesterday we saw the divorce of Domain approved so this may clear the way for a clean FXJ to be the subject of some sort of deal. Certainly News is stepping up to the plate given its ramp up of investment in Sky Business. SWM is looking at greater collaboration between its various outlets. It did say that FXJ has too low a physical presence currently to interest it whilst The West Australian is growing readership. Stokes is unsure whether mergers will bring the synergies that would make it desirable. SWM reiterated its forecast for earnings of between $220m -$240m and the focus was on cost savings. Between opportunities elsewhere at the moment. Free to air and print media is facing a future ‘Myeresque’ in its nature. Radio seems the only medium that is escaping serious digital disruption.

BHP had this to say about Electric Vehicles (EVs) and copper demand.

  • The global electric vehicle fleet is expected to increase from 1m vehicles today to about 140m by 2035, according to the man who oversees the copper business in the Americas, adding electric cars could need up to 105kg of copper each as they evolve.
  • Solar plants required about 5kg of copper per kilowatt, which was more than twice the intensity of other generation forms.
  • In an electric car, about 80kg of copper was needed, compared with 20kg in petrol cars.
  • Copper demand for electric vehicle fleets grow to an estimated 12 million tonnes, or more than half of the current global market for refined copper.

What to buy for copper exposure. BHP, RIO, IGO, SFR, MLX. There are more smaller cap miners like PAN is one. With the RIO buyback on currently that will also support the share price.

Clarence

 

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