UNIT University Network for Investing and Trading UniMelb

Before The Bell 22/09/2019

By: Andrew He


US Markets

US-China trade talks have been cut short as Chinese negotiators ended their trip to Washington prematurely, cancelling their trip to visit US farmers without any proper explanation. Both sides have issued a statement characterizing the talks as constructive and productive however not fruitful enough to reach an agreement. The cancellation of the trip to the US farmers caused US markets to fall as optimism about the talks faded.

The Fed’s rate cut caused uncertainty amongst investors as the Fed committee was divided on whether to cut or not. The Fed cut interest rates for the second time this year to help sustain economic expansion but gave mixed signals on future rate cuts. Investors dislike uncertainty surrounding the American economy and hence we expect to see possible outflow of equities and inflows into safe heaven assets such as gold or bonds.

Upcoming IPO

Peloton, a fitness company which produces expensive exercise bikes and treadmills with built-in screens connecting users to streaming fitness classes is about to IPO this week. This premium fitness retailer posted $915 million in revenue for its 2019 fiscal year however had a net loss of $245.7 million. It plans to price its shares between $26 and $29, offering 40 million shares and seeks to raise around $1.16b billion, bringing its total value around $8bn. Once public, it will be listed under the Nasdaq under the ticker symbol PTON. Lead underwriters are Goldman Sachs and JP Morgan.

Australian equities

This week approximately $12bn in dividends are to be paid out from BHP, TLS, MPL, COL, QAN, CBA and others. Aussie markets will be reacting to Scott Morrison’s visit to the White house and his talks with Donald Trump regarding Australia-US relations. This visit has strengthened the relationship between US and Australia and this optimism may be reflected in the markets.

IOOF seems to have dodged a bullet as the APRA fails to disqualify its executives over failing to act in the best interests of clients. APRA has failed to prove any of the contraventions of the Superannuation Industry Supervision causing IOOF’s shares to rise 7% on Friday.

Commodities

Spot gold rose 0.5% to US$1500.55 per ounce as investors were uncertain about the future US interest rates

WTI crude oil: 58.39 USD

Iron ore: 93.46 USD

Silver: 17.95 USD

Upcoming key economic events

23/09 Mon: Australia’s PMI Composite; Australia’s PMI Manufacturing and Australia’s PMI Services

24/09 Tues: ANZ Roy Morgan Weekly Consumer Confidence Index and RBA Governor Lowe Speech

25/09 Wed: AUD Skilled Vacancies (MoM) (AUG)

26/09 Thurs: AUD Job Vacancies (AUG)


Sources: AFR, Dailyfx, CNBC, Market watch, ABC news

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