Author: james Carter
My attention today has moved away from the continual fall in crude oil prices, to US interest rates. They are falling ahead of anticipated increases in official interest rates this year? Global growth is spluttering at best after years of interest rates close to zero with US 10 year bonds falling under 2% for the first time since mid-2013 (see chart 1), clearly Illustrating investors are losing confidence in world economies fast. We have had continual economic stimulus from World Central Banks since the GFC 5 years ago and markets now don’t believe it will result in any impact fast – yesterday, additional China stimulus was announced and the markets fell.
• The ASX 200 began the day weak, trading as low as 5318, or -46 points in the morning; however it managed to close only 11 points lower at 5353 as some investors see these levels inexpensive. We remain bearish at present.• The energy sector continued its weakness, with Santos (STO) down 1.3% at $7.45 and Woodside Petroleum (WPL), down 0.9% at $36.14.• The Banking Sector ended the day mixed, with Commonwealth Bank (CBA) down 0.2% at $85.11, versus National Australia Bank (NAB) up 0.2% at $33.42.
This morning I happily woke to see the Dow down over 300 points (1.9%). All fingers were pointing at oil again, which fell over 5% to sub $US50/barrel for the first time since mid-2009 – see chart 1. However there is more than just oil battering the local resource stocks; conversely falling commodities is helping weaken the $A which in turn appears to be helping the ASX200.
• The ASX 200 fell 86 points, or down 1.6% at 5,364, following the US lead last night, with the Energy sector being the worst performer. Could the anticipated 10% correction have begun?• As anticipated, BHP Billiton closed $1.37, or 4.7% lower at $28.11, Woodside Petroleum ended the day down $1.87, or -4.9% at $36.46 and Santos (STO) down 71c, or -8.6% at $7.55. We remain not to be investors in this sector purely due to the companies being price takers rather than makers.• The banking sector also descended, with ANZ down 39c at $31.78 and National Australia Bank (NAB) down 27c at $33.34.• There were very few diamonds in the rough today, with Newcrest Mining (NCM) up 2.5% at $11.73 and Qantas (QAN) benefiting from the ever decreasing oil price, up 4.4% at $2.61.
American Equities usually corrects ahead of Interest Rate Rises
• It was a choppy session for the ASX 200 today, closing only 14 points higher at 5450, with a range of 40 points.• The banking sector closed mixed, with Westpac (WBC) down 0.3% at $33.16 versus Commonwealth Bank (CBA), up 0.2% at $85.95.• The Gold sector outperformed the market, with Newcrest (NCM) ending the day up 49c, or +4.5% at $11.45 and Regis Resources (RRL) up 5.5c, or +2.8% at $1.995, as it seems some short covering was apparent today.• The New Zealand 50 index had a great start to the year, ending its trading day at record highs, up 34 points at 5603.
Will 2015 be the year for the “3 Ugly Sisters”?
• The ASX 200 rallied ended the week on a positive note, up 128 points, or +2.5% at 5339.• It was pleasant to see a sea of green rather than red, with both the banking and resource sector contributing to its strength today, with National Australia Bank up 93c, or $2.9% at $32.66 and BHP Billiton (BHP) up 94c, or +3.4% at $28.98.• Telstra (TLS) closed 1.2% higher at $5.89 after it had announced that it will begin planning the NBN rollout for next year, worth up to $390M.• Please watch out for the Hickman Report tomorrow.
Generally, switching banks over the years has been a trade that has benefited brokers with commissions more than investors with returns. When we look at the “Big 4” Australian banks over the last decade (chart 1), the main standout was National Bank (NAB) in 2007, selling was wise, as was being significantly overweight Commonwealth Bank (CBA). This trend has continued robustly over the last 12 months. Unfortunately, this is another example that investing too much money purely behind analysts’ opinions is fraught with danger.
•The ASX 200 rallied 48 points higher today at 5211 after trading as high as 5265.
Really bullish, there's more to go in the reflation rally
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