UNIT University Network for Investing and Trading UniMelb

Market Wrap 27/04/2018

By: Michael Lee


Equities:

This week has seen the US equity market going through a roller coaster. The NASDAQ tumbled more than 1.6% on Tuesday after Alphabet dropped more than 5% amid concerns of its capex spending in order to keep up with rivals. Luckily, investor’s gloom around overvalued technology sectors was lifted on Thursday with Amazon reporting strong surge from its cloud computing business and Facebook share price jumping 9% on the back of surging users, now standing at 1.45 billion daily active users and 49% growth in total revenue. Globally, the IMF’s 37th meeting over the last weekend shed light on the peaceful resolution between the largest two economies, US and China, as IMF chief Christine Lagarde urged against protectionism and said “this weekend’s spring meeting had made progress towards dialogue.” One event that caught investors off guard was the historical walk on Friday by the North Korea leader, Kim Jong Un, across the Korean demilitarized zone to meet with President Moon. This symbolism-laden meeting could spell decades of peace and prosperity for both the North and South with the KOSDAQ advancing by about 0.3%. Back in Australia, the Royal Commission’s probe into financial firms with allegations that AMP charged clients fees for no service and Westpac failed to safeguard the quality of home mortgage. This sent both share price down more than 5% and 1% for the week. The ASX 200 gained 1.2% in the same period.

Commodities:

WTI Crude price remained bullish at $68 US dollar/bbl after teetering around one year high, $68.64 on Monday. Gold dropped to US$1318/oz with room for downturns on the ease of trade-war tension and Korean peninsula conflicts.

Forex:

AUD/USD continued to weaken and traded around $0.75 to end the week. Similarly, the British Pound depreciated to trade at A$1.39 on Friday.

Bonds:

The yield on 10-year US treasury raised to about 3% this week. Citigroup strategists Jabaz Mathai and Jason Williams suggested investors “go long duration by purchasing 10-year notes at about 3 per cent.”. With the US’s treasury yield leading the pace in the developed economies, Asian nations such as Hong Kong, Singapore and South Korean had all raised their yield to 2.06%, 2.51% and 2.71%. Meanwhile, in Europe, the yield remained predominantly low with German 10-year yield at 0.6%, 1.5% for UK and 0.8% for France.

Other Assets:

Bitcoin popularity is back and trading at $9,195.86, close to 3-month highs. In the real estate market, the median house price fell 1.2% in March quarter, dragged by 2% and 2.6% drops in the Perth and Sydney markets, respectively.

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