In the U.S.:
- The Fed raised rates a quarter point and laid the framework for one more hike this year. Of note, the Wall Street Journal reported that Fed Chair Powell downplayed concerns about potential signaling effects from the yield curve flattening trend and stated that there was no reason to think that the probability of a recession in the next year or two is at all elevated.
Digital Realty Trust (DLR), via its Brazilian subsidiary, has agreed to acquire Ascenty from Great Hill Partners in ~$1.8B transaction. Ascenty is one of Latin America’s largest data center providers with 14 data centers in operation and/or under construction.
- Little headway has been made in the trade war as Beijing cancelled talks with the US as new tariffs on Chinese goods went into effect this week.
- August industrial production rose 0.7% m/m versus a 0.2% m/m decline in July. August output was led by transport equipment, general manufacturing equipment, and plastics while technology was the main detractor.
- Prime Minister Shinzo Abe reached an agreement on trade with US President Donald Trump. The US refrained from imposing a 25% auto import tariff in exchange for Japan’s acceptance of the bilateral trade talks that it had long opposed.
Hong Kong real estate companies declined this week amid concerns property sales will slow down and weigh on profitability. In addition, economists expect tightening liquidity to be a headwind in the Hong Kong property market going forward.
- The Italian government agreed to target a 2.4% budget deficit to GDP ratio for 2019. This marked a big win for the ruling populist coalition, which pushed for a budget to fund campaign promises such as basic income for the poor and a reduction in the minimum retirement age. However, the move will likely be rejected by the European Commission and Italian debt may take a ratings hit.
- UK Q2 final GDP was 1.2% y/y versus Q1’s revised 1.1% y/y reading. Growth in latest quarter was driven by the services sector, which increased by 0.6%, due partly to an increase in retail sales.
London property specialist Shaftesbury Plc provided an interim update on its activities since releasing half year results for the six-months ended March 31, 2018. While the UK more broadly continues to be burdened by the continuing uncertainty of Brexit negotiations between the UK and the EU, it business operations have remained steady across its unique portfolio of Central London assets that focuses primarily on the retail shops, restaurants, cafes and bars. Management indicated that footfall across its portfolio remained strong and demand for space healthy over the summer months. Occupancy across its portfolio remains high with vacancy levels in line with the long term average, at or below 3% of ERV (Estimated Rental Value). While they continue to make good leasing progress at their existing development schemes, they did note that the current climate is causing prospective tenants for larger space to be a bit more cautious in recent months. This may be a sign of broader business caution as the March 31, 2019 deadline for Brexit approaches and no deal has been reached for the terms of the UK’s exit from the EU.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.