Market Matters Afternoon Report Monday 6th June 2016

Afternoon Report 06/06/2016

Market Matters Afternoon Report Monday 6th June 2016

Good Afternoon everyone

Market Data

What Mattered Today

Another decent session today with the miners leading the charge – specifically the GOLD coys - but more on that later. BHP put on +3.72% and accounted for +7 index points....closing at $19.22. RIO also strong up +3.86% to close at $45.22. Banks were also firm – CBA the best of them up +1.12% to close at $76.60; ANZ the worst closing down -0.52% to $24.96.

A reasonably big range today; +/-57pts. 5317 low, 5374 high and a close at 5360; up +41pts or +0.78%.

Gold’s were the main beneficiary of Friday’s market moves in the U.S. which saw U.S non-farm payrolls print a v lacklustre +38k jobs (v168k expected) and we saw some meaningful downward revisions to prior months. It seems the U.S jobs situation is not as strong as policy makers would have hoped and this now casts a big shadow over near term rate hikes in the U.S.

We now see a 4% chance for a June hike and a 27% chance for a hike in July. These numbers have come back from 25% & 56% respectively…

So – a lower chance for a near term rate hike in the U.S put massive downward pressure on the U.S currency – as shown here in the U.S Dollar Index – and pressure on Bond yields as shown below by the US five year bond yield.

The Q from a domestic perspective is; How does this play into our investment/trading decisions over the next few weeks/months. The obvious implication globally is ‘more of the same’. Accommodative central bank policy – low rates for longer – will continue to support asset prices, put pressure on the $US which is supportive of commodities such as GOLD.

It also puts our own RBA back into focus. They cut rates on a weak inflation outlook, however we’ve seen better data from a range of metrics since then. Given the U.S is now ‘more unlikely’ to raise rates, the RBA becomes ‘more likely’ to cut again to keep a lid on our currency.

Again, low rates support asset prices and fuel the massive imbalances building in our (and others) economy. Still, we trade/invest in the here and now and Market Matters has always aimed at offering a highly practical, actionable and pragmatic view on markets. Something a lot of the ‘theoretical’ subscription services don’t.

Anyway, Gold was clearly the main beneficiary on the ASX today with a list of Gold stocks, sorted by market capitalisation (size) listed below – keep this list close by as we will continue to trade/invest in Gold stocks throughout 2016 & beyond . Market Matters were long Regis Resources (RRL) and we took profits today. Over 10% in seven days.

Source; IRESS

Why did we take profits? The moves outlined above were big on Friday which supported a very strong move in markets. Tonight, we have -Fed Chairwoman Yellen speak at the world affairs council of Philadelphia while the Fed’s Rosengran is also scheduled to speak at Helsinki central banking conference. Both of these speeches are short term risk factors for the GOLD trade.

The market, as of Friday is now clearly positioned for no-hike in June or July. If Yellen and Co say anything that contradicts this view, the $US will rally and importantly, Gold will fall. Short term caution was warranted in our view.

Here is the GOLD sector on the ASX today…

Source; IRESS

Insurance stocks were also in focus today following the huge weather events in NSW & Queensland. Beachfront property in Collaroy was clearly hit hard.

Source; SMH

Although a very sad event for many property owners, the financial impact on Suncorp (SUN) is unlikely to be high unless we get another large one before 30 June. IAG has calendar year cover, so depends on rest of this calendar year as to whether or not it will materially impact their earnings. That said, claims will take a few days to start coming in. Suncorp has capacity for $58m worth of claims in the next three weeks (prior to June 30) before it will impact their earnings.

IAG now has $202m for rest of calendar year.

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

Keep an eye for Janet Yellen’s speech tonight. A lot of focus will be on her comments specifically on her read of Friday’s employment print and what it means for policy. Elsewhere, we have ECB President Mario Draghi speak, and PMI data from Germany. Chinese trade balance and inflation data will be interesting on Wednesday.

Global FUTURES Markets as @ 5.12pm

Source; CNN

Regards,

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 6/06/2016. 5:00PM.

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