UNIT University Network for Investing and Trading UniMelb

Before The Bell 19/08/2018

By: Jason Shao


Equities:

Currently in the midst of earnings season, many reports by companies are scheduled to be released on the ASX in the coming weeks. For those interested in following individual equities, keep an eye out for reports from large companies including Woolworths, Sydney Airport, Scentre Group, BHP and A2 Milk, amongst many others this week. The ASX 200 has been strong in the past few months, and if companies report well, could see the same sentiment pushing forward through the rest of the week. The ASX 200 closed at 6,339 last Friday.

Meanwhile in the US, much discussion has been focussed around Tesla, since it’s report and Elon Musk’s tweet, stating his plans to take the company private at $420 and that it has secured funding. Despite increases of 30% in the past month from $290 to $380, it has since dived back to $305 a share. Elon Musk and the SEC will be having a meeting as early as this week to discuss this matter. Any other tweets from Elon Musk and further announcements with the SEC will be heavily anticipated and may cause strong price movements in either direction.

Commodities:

Trade tensions have continued to push oil prices down, with Crude Oil reaching a low of $65 a barrel last week. With no signs of trade wars easing, a recovery in oil prices may not happen so soon. This contrasts to the high of $72 a barrel in June, representing a fall of approximately 10%. This decline also means it’s the longest decline since 2015 for oil prices.

Gold prices have tumbled in the past few months, despite tensions regarding trade and politics across the globe. Although typically considered a safe haven asset, it has fallen from $1,372 per ounce in April to $1,192 per ounce. Contributed to by a strong US Dollar, it has since retracted in the past week, and may see gold gain some minor ground if the US Dollar slides further.

Bonds:

In the past month, 10-year yields have fallen from 3% to 2.86% and could continue to see falls in the next week. It has traded between 2.8% and 3.1% for the better part of the past 6 months, but the past year has seen yields rise strongly, so expect the fall in the yields to be temporary, as the Fed continues to hike rates over the next year.

Forex:

The US Dollar has rallied in the past month, from a low of 94.23 to a high of 96.73 using the Bloomberg Dollar Spot Index (which measures the US Dollar to a basket of currencies), however it has since retraced to 96.10. The slight fall in the greenback saw the Australian Dollar retrace to 73 US cents, but this is unlikely to continue this week, given the downward trend against the greenback this year.

Despite a slight lift towards the end of last week in the Turkish Lira, it resumed sliding on Friday as the US further threatens sanctions.  Some analysts call the slight rise a “dead cat bounce” and “temporary”. It is likely to see further falls in the Turkish Lira, as President Erdogan desperately seeks meetings with investors in order to tackle this major crisis.

Other Assets:

Recent revelations into the retail super industry as part of the Financial Services Royal Commission could hamper inflows, as spotlights are on fees and the conflicted interests of the super funds. This could see larger inflows into index ETFs over the next year, as people shift money away from high-fee retail funds into lower cost passive investment options, or at least encourage people to take a look into their own fund and see if adjustments can be made.

Similar Posts