Author: james Carter
With Quantitative Easing (QE)/interest rates the dominant factor at present for equity markets, it makes no sense for traders/investors in the Australian equity market to be looking to our American friends for future trends. The US is about to end QE and start raising interest rates, a number of economists are predicting as soon as June – see chart 2. Importantly, even if rates remain on hold until 2016, there currently appears zero chance of further rate cuts/QE in the US. Conversely, Europe has committed to boost inflation and the $US1.1 trillion QE has entered its 3rd day sending the DAX up another 2.7% – see chart 3.
• The ASX 200 rallied from the start today, closing 57 points higher at 5850, with compliments to further rate cuts around the world. Today it was Bank of Korea, cutting its key interest rate by 0.25% to 1.75%. This is in line with our ‘buy banks’ view and note yesterday. – click here to view yesterday’s note.• The banking sector outperformed the market as expected, with Westpac (WBC) ending the day 1.6% higher at $38.09 and Commonwealth Bank (CBA) up 1.4% at $91.82.• QBE Insurance remains resilient as investors anticipate a rate rise earlier than expected in the US. QBE closed 1.8% at $13.58 and is up 21.1% for the year.• iiNet (IIN) rallied 2.4% at $6.81, despite trading ex-dividend (10.5c fully franked) today. We currently hold IIN as mentioned live yesterday to our Subscribers.
Hopefully today is Buy Buy Buy and not Bye Bye Bye!!!
• The ASX 200 closed relatively well compared its US and European counterparts overnight, ending the day down 31 points (-0.5%) at 5793 after trading as low as 5748 earlier this morning.• The early rally from today’s low was driven by comments made by a senior RBA official suggesting rates could be cut again.• Both the banking and resources sector contributed to the weakness today. National Australia Bank closed down 0.5% at $37.56 and BHP Billiton (BHP) down 5% at $30.33 (trading ex-dividend).• Today, Subscribers received a live trading alert with the transactions made in the ‘Telco’ sector, please keep an eye out on further alerts for any opportunities that could be seen during the day.
Reminder: if you have not registered for today’s Market Matters webcast at 4.30pm AEST (Investor Update: Low Interest Rates – Yield or Growth?) – click here to secure your spot on the webinar
• The ASX 200 had a choppy session and ended the day slightly higher, up 3 points at 5,824.• The banking sector closed higher, Commonwealth Bank (CBA) settled 0.2% at $90.68 while Westpac (WBC) closed 0.8% higher at $37.67.• The Iron Ore space closed weak and as expected BHP Billiton (BHP) -0.8% at $31.91 outperformed Rio Tinto (RIO) -1.1% at $58.55 and Fortescue Metals (FMG) -5.6% at $2.02.• The energy sector was surprisingly weak today. Santos (STO) closed 2.9% lower at $7.33 after disappointing investors with its drilling report.• To those who registered for today’s Market Matters webcast at 4.30pm AEST, we look forward to speaking with you soon!
Gold was hammered, down $US32/oz. (-2.7%) on Friday, its largest fall in over a year. The US unemployment data released on Friday was extremely positive, increasing the likelihood of an interest rate rise in the US by the middle of 2015 – see chart 3. Higher rates, with no obvious inflation, is very bearish for gold which pays its holders nothing. I have received a number of questions from subscribers in recent weeks about where we should look to buy into gold stocks, but fundamentally I find it impossible to be optimistic gold at present.No market pundits were talking the “Gold Story” when we bought both RRL and NCM in late 2014, but over recent weeks, it has been receiving more airplay which is a classic contrarian sell signal. Importantly, I need a combination of positive fundamental and technical factors to start aggressively buying a stock/sector. The gold sector is one where everything must align for me to start buying as I certainly can find logic in Warren Buffett’s thoughts on the precious metal:
• The ASX 200 closed 78 points lower (-1.3%) at 5821, following the weak US lead and not helped by low volumes today due to Victoria and Tasmania on holiday due to Labour day.• There were very little gems found in the sea of red. QBE Insurance (QBE) outperformed, up 2.8% at $13.81 as investors see QBE benefit from a rise in US interest rates.• The banking sector was weak, Commonwealth Bank, the Alpha of the big four closed 0.6% lower at $90.52. • The commodities space continued to disappoint – gold continued to lose its lustre as Newcrest Mining (NCM) ended 4.7% lower at $12.65 and Regis Resources (RRL) down 12.1% at $1.23. While BHP Billiton (BHP) closed 1.5% lower at $32.15 and RIO Tinto (RIO) down 2.0% at $59.20.
Macquarie illustrates the current strength in the Australian stock market
• The ASX 200 closed only 5 points lower at 5899 today in a choppy session, as investors pause and wait for the US employment data due to be released tonight. • QBE Insurance rallied 2.5% to $13.43 in anticipation for a stronger employment data, meaning a rate hike to be considered in the US hopefully prior to June.• The Iron Ore sector sold off as anticipated, with RIO Tinto (RIO) ending the day 1.2% lower at $60.39 and Fortescue Metals (FMG) down 6.1% at $2.15. As mentioned previously, we are bearish this sector as they are regards price takers rather than price makers.• Regis Resources (RRL) plunged 26.7% to $1.40 after announcing its operating update and disappointing investors with its current production. As mentioned in January, we took profit on RRL and saw better risk reward elsewhere.• Please watch out for the Hickman Report tomorrow.
Really bullish, there's more to go in the reflation rally
Please enter your login details
Forgot password? Request a One Time Password or reset your password
One Time Password
Check your email for an email from [email protected]
Subject: Your OTP for Account Access
This email will have a code you can use as your One Time Password for instant access
To reset your password, enter your email address
A link to create a new password will be sent to the email address you have registered to your account.
Enter and confirm your new password
Congratulations your password has been reset
Sorry, but your key is expired.
Sorry, but your key is invalid.
Something go wrong.
Only available to Market Matters members
Hi, this is only available to members. Join today and access the latest views on the latest developments from a professional money manager.
Smart Phone App
Our Smart Phone App will give you access to much of our content and notifications. Download for free today.
