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Market Wrap 18/05/2019

By: Pooja Mallard


Equities:

Big gainers this week in US markets include Cisco, Walmart & Nvidia. The S&P 500 closed on 2,859 points, Nvidia shares jumping 6% in extended trading after announcing better-than-estimated revenues for Q1, as well as revised and improved revenue estimate for Q2. The ASX 200 rose 0.9% this week, closing on Friday at 6,365.3. It also briefly hit an 11-year high of 6,398 in the early hours of trading on Friday. Miners  BHP Group, Rio Tinto and Fortescue Metals Group each rose by 4.5%, 6.4% and 18.7% respectively, mostly due to an iron ore surge at a five-year high of $US100 a tonne.. Following UBS’ increase in target price on healthcare company CSL from $207.5 to $223, CSL was placed amongst market leaders this week, having closed 4.7% higher at $206.51. Conversely the majors took a hit this week in the wake of recent scandals – most recently, ANZ’S failure to comply with RBNZ’s regulatory requirements, causing a decline in share price of 6%. NAB and Westpac slid by 7.8% and 6.6% respectively with Commonwealth Bank falling 3.4% after the release of its quarterly earnings update early this week. This general decline in the banking sector can also be attributed to stocks trading ex-dividend.

Commodities:

Oil prices have been steadily increasing this past week amidst increasing geopolitical tensions in the Middle East. With Brent crude futures at $72.80 per barrel and U.S. West Texas Intermediate (WTI) crude futures at $63.11per barrel, crude is on track for a 3.7% and 2.4% weekly gain respectively. On a larger scale, OPEC’s “production limiting deal” of 800,000 bpd has caused a 30% surge in oil prices this year and their recent monthly report suggests that producers have been cutting more than agreed.According to analysts, this could lead to a 2019 supply deficit of around 500,000 bpd if this deal is maintained.

Forex:

The Australian dollar has taken a tumble against the greenback as Trump adamantly refuses to back out of the persistent trade war with Beijing. AUD is down 8% in the past year and is currently trading at a three-year low – not considering the “flash crash” in January 2016 that brought the Australian dollar down to 67.15c.

On the other hand, the Chinese renminbi has been relatively stable against the US dollar, sitting at 6.90 yuan. According to Capital Economics, a signal of an out-of-control trade war would be a currency devaluation past the threshold of 7 yuan against the greenback. However, policymakers have established that a Chinese renminbi devaluation aimed at making exports attractive is not in the works but rather to strike a trade deal with the U.S.

Other Assets:

Despite bitcoin’s strong comeback a month ago, its price fell by almost 20% to $6,178 at Bitstamp exchange, down 21.6% from the previous close. However, London-based blockchain data provider, TokenAnalyst argues that the crypto-currency’s recovery back in early April may have been bolstered by capital flight from trading platforms such as Bitfinex in response to allegations that client and corporate funds were “co-mingled” as a means to coverup significant losses. Considering the instability of the bitcoin market and how easily it can be exploited, future spikes are probable.


Sources: AFR, Bloomberg, MarketWatch, Reuters, Financial Times

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