UNIT University Network for Investing and Trading UniMelb

Before The Bell 13/05/2019

By: Sean Cartwright


Equities:

Equity markets were shaky to start the week due to trade war concerns, but a nice close from the Dow on Friday prevented a large red candle on weekly charts. The VIX also saw some action with an 80% pump on the back of a few Trump tweets. The close on Friday should see our own market open slightly higher on Monday. Our market experienced a similar pullback throughout last week although not to the same magnitude of the Dow and I expect to see the XJO to come out strongly and test that psychological 6400 level this week. Importantly, home loan and lending numbers for March will be released on Monday, I am predicting we will see a large decrease in lending and more headaches for the falling property market. I’d expect the banks to take a bit of a hit if we do see some pretty unfavourable numbers. This week I expect our commodity names to get a bit of action after having a week of pullbacks throughout the resource sector. With iron ore prices continuing up I expect our miners to see some buying after many are down over 10% in the last few weeks. Our ASX200 utilities sector index had a great week closing up 4%.

It’s shaping up to be an interesting week in the Aussie market leading up to our election on Saturday.

Commodities:

Iron ore price continues higher to 95.08USD, this is on the back of the Vale mine raising the suggestion that it may take three years to get back to full production. Gold looks increasingly better here at 1836.90 AUD (or 1285.83 USD) per ounce and we are seeing the rise in gold spot price translate into higher share prices in our Aussie gold names, and I expect this gold strength to continue into next week. Oil experiencing a slight pullback over the last few weeks with Crude closing the week at $61.66 and Brent at $70.62. Copper continues to trend lower (acting as a good proxy for growth) back at 2.77USD after failing to break that 3.00 mark.

Forex:

The AUD continues to fall against the USD with the increasing threat of the RBA cutting interest rates. All eyes will be on the April unemployment figures released on Thursday. Currently the AUD hovering around $0.70 USD and a break of this level could see a retest of the lows of the flash crash back in January.

Bonds:

Australian bonds continue to trend lower with the 2, 5 and 10 year yields at 1.31%, 1.34% and 1.74% respectively.


Sources: Australian Financial Review, Sydney Morning Herald, Investopedia, Bloomberg, MarketWatch

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