By: Mazen Elsabrouty
With global uncertainties continuing to frustrate investors, the ASX200 has closed at 6,251.30 today, up 1.13% this week. The ASX200 had been making a modest gain for the week before the Friday session boosted the ASX200 by 0.85%. The dovish monetary policy tones set by the European Central Bank and the US Federal Reserve following their latest meetings have extended to Australian markets as investors ride out the momentum trade that has driven equity markets higher in 2019.
Australian casino giant Crown Resorts soared 11.22% this week after talks of a $10 billion potential takeover by US casino operator Wynn Resorts came to light. Despite the preliminary negotiations being had, Wynn Group shut down the bid citing the premature disclosure of these confidential talks as the key reason. Crown shares still made significant gains for the week highlighting that investors still have hope that a deal could be back on the cards soon. Elsewhere, energy giants BHP, Santos and Woodside all rose this week as oil prices continue to surge higher. However, Bank of Queensland shares fell 7.69% after reporting first half results that came in lower than management guidance, even after accounting for their most recent profit downgrade in February.
In international news, the European Union has given the United Kingdom a 6 month extension for Brexit negotiations to October 31. This has sent the British pound trading slightly reaching highs of US$1.33 before falling back down to US$1.31. Despite the extension, investors are still just as uncertain as to how Brexit will play out as all options are still on the table.
Oil prices have continued to rise as it hits a 5 month high at just under US$72 per barrel amid continuing U.S. sanctions on Iran and Venezuela, consistent OPEC oil supply cuts and US-China trade optimism. Moreover, Saudi Arabia, arguably the largest OPEC member, has continued to cut production by more than the pledged reduction level of 1.2 million barrels per day.
Following dovish central bank policy, retail sales data and an improving Chinese economy, the Australian dollar has made slight gains to reach 71.73c USD on Friday. Despite the futures market pricing in 2 rate cuts by August 2020, the Australian dollar has managed to stay relatively stable. The Turkish lira has continued to fall amid political pressures and is the second worst performing emerging market currency against the USD, with only the Argentine peso performing worse.
As central banks all over the world adopt a consistent dovish tone, markets have placed upward pressure on government bond yields. 5 and 10 year U.S. treasury yields have risen 8 and 6 basis points to 2.38% and 2.56% respectively. In contrast, the 5 and 10 year yield on Australian government bonds are 1.59% and 1.96%.
It looks like the cryptocurrency craze is back on with Bitcoin surging past the US$5,000 mark earlier this week. With the creation of the Initial Exchange Offering, raising capital through crypto exchanges and getting them to underwrite companies and their projects, is said to be sparking the Bitcoin comeback.
Sources: AFR, Yahoo Finance, Bloomberg, Financial Times