UNIT University Network for Investing and Trading UniMelb

Market Wrap 24/08/2018

By: Mazen Elsabrouty


Equities

With the leadership spill talk coming out of Canberra early this week, the ASX200 has closed at 6,247.3 today, down 1.4% and at its lowest level in 3 weeks. With all of last week’s gains effectively wiped out, investors flocked towards market darlings Webjet, Wisetech Global and A2 Milk whose stock prices rose 11.5%, 22.1% and 7.6% respectively after posting strong results. However, with ASX heavyweights Qantas, BHP and Woolworths failing to meet analyst forecasts, investors sent their stocks down 6.0%, 1.3% and 1.8% respectively.

Furthermore, with the National Energy Guarantee being postponed indefinitely, energy policy reform has been dealt a huge blow, slamming the stock prices of majors Origin Energy and AGL Energy by 6.0% and 5.8% respectively. If that wasn’t enough, Andy Vesey, CEO of AGL Energy, resigned today with his decision exacerbated by the ongoing energy policy concerns. Additionally, with merger talks between TPG and Vodafone escalating following the Federal Government’s decision to ban Huawei from 5G, investors loved the possibility of less competition in the Australian telecommunications sector, helping Vodafone, TPG and Hutchinson Australia add a whopping $3.9 billion in market value.

In international news, despite talks between China and the U.S. underway, both countries have imposed new trade tariffs on each other. This sees the U.S. collecting an additional 25% on Chinese imports ranging from motorcycles to steam turbines, whereas China will collect a similar amount on U.S. imports ranging from coal to medical instruments.

Commodities

Oil prices have gone up this week with Brent Crude Oil climbing nearly 5% to just over $75 USD. Following the recent U.S. sanctions on Iran, it appears that the global supply of crude oil is decreasing. Ahead of Federal Reserve Chairman Jim Powell’s keynote speech, gold prices are up by 3% this week to just over $1,191 USD amid growing political uncertainty in the U.S.

Forex

Following news over the leadership spill breaking out, the Australian dollar slid to as low as 72.39c against the USD on Thursday. However, after Scott Morrison was elected as the new Prime Minister, the Australian dollar was able to move back up to 72.89c against the greenback. The Turkish Lira has declined 1% against the U.S. dollar this week.

Bonds

As Trump openly criticised the Fed’s recent interest rate hikes, markets have placed downward pressure on U.S. treasury yields, with the 3-month yield dropping to 2.04% in addition to the 1, 5- and 10-year yields all falling to 2.42%, 2.73% and 2.83% respectively. In contrast, the 1, 5- and 10- year yields on Australian government bonds are 1.99%, 2.17% and 2.54%.

Other Assets

President Nicholas Maduro of Venezuela has just pegged the Venezuelan currency to a cryptocurrency called petro such that 3,600 bolivars are equivalent to 1 petro. In doing so, the local currency’s devaluation has led to a hyperinflation crisis with 1 U.S. dollar now worth 6 million bolivars compared to 285,000 bolivars just last week!


Source: AFR, Reuters, Bloomberg, Financial Times

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