UNIT University Network for Investing and Trading UniMelb

Market Wrap 20/04/2018

By: Alan Liang


Equities:

The S&P/ASX 200 index recorded its third consecutive weekly gain and finished at 5,868.8, up 39.7 points for the week. The mining sector was the best performer, supported by elevated commodity prices and multi-year highs for aluminium and nickel. South32 and Western Areas both enjoyed a strong week of gains (12.9% and 11.1% respectively) on the back of these elevated prices.

However, the financial sector was a significant drag on the market as the fallout from the royal commission continued. Share prices of Commonwealth Bank, Westpac, ANZ and NAB all fell due to providing negligent financial advice. Most notably, AMP fell 9.9% after it was revealed it submitted misleading statements to ASIC on 20 separate occasions.

Commodities:

Aluminium and nickel prices rose to multi-year highs due to sanctions against Russian miners. Earlier in the week, crude oil prices hit their highest levels since late 2014 as OPEC-led supply cuts continued to draw down excess global supply. Saudi Arabia, one of the world’s top oil exporters, has been leading the way in cutting supply by withholding its production since 2017. Prices are also being supported on the expectation that the US would impose sanctions on OPEC-member Iran (who have been supportive of Bashar al-Assad’s Syria regime).

Forex:

The Australian Dollar ended the week at US77.1 cents. With no key economic data set to be released by the RBA until next week, the Australian Dollar dropped on the back of US dollar strength. The British Pound also hit lows against the Dollar following soft UK retail sales data and comments from Bank of England Governor Mark Carney which dampened widespread expectations of an interest rate hike in May.

Bonds:

In the US, 10-year Treasury yields rose to 2.93% supported by increasing inflation pressures. The Federal Reserve is believed to continue to raise rates later this year even if US growth and inflation remain stubbornly low.

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