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  • ASX slides for a third straight week

    2019 - 02.13

    The ASX ended a week dominated again by worries about North Korea with a loss, while the Australian dollar soared to a two-year high.
    Nanjing Night Net

    The S&P/ASX 200 index fell 0.3 per cent on Friday to 5672.6, with the move bringing losses for the week to 0.9 per cent and three-week losses to around 1.3 per cent.

    The week started on a sour note after North Korea’s successful nuclear test on Sunday raised the risk of the world spiralling into a military conflict with the rogue nation and amid speculation of further aggression from the rogue state this weekend.

    “We need to brace for possibly more instability as there is some thought that North Korea may launch its intercontinental ballistic missile this Saturday on National Foundation Day,” Bell Potter strategist RIchard Coppleson said.

    This weekend is also expected to see Hurricane Irma making landfall in the US, with the storm coming hard on the heels of Hurricane Harvey’s devastation of Texas.

    Investors are starting to fret that this year’s US storm season will take a toll on the US economy, one of the factors that has helped to depress the US dollar this week and conversely pushed the Australian dollar to over US81?? on Friday, its highest level since May 2015.

    The RBA’s reassuring comments on the Australian economy on Tuesday while keeping interest rates on hold at 1.5 per cent, and GDP numbers on Wednesday that were mildly weaker than forecast but still robust, also offered support to the currency this week.

    The US dollar drop went hand-in-hand with a drop in US yields. US banks suffered and Australian banks followed their American counterparts during the week, with the financials sector losing 2.5 per cent over the five sessions.

    Citi bank analysts commented that despite the recent share price falls in the Australian listed banks, that they “see little room for share price improvement from here”.

    CBA lost 3 per cent over the week, NAB lost 1 per cent, ANZ fell 2.5 per cent and Westpac declined 1.7 per cent.

    Miners had a better week, however, with the sector gaining 0.5 per cent as Rio TInto and Newcrest rose 0.3 per cent and South 32 jumped 6.1 per cent.

    “The sector is in the best shape we have seen from a balance sheet perspective, with a large part of our coverage either net cash or close to ungeared,” said JPMorgan analysts who expect the sector to continue to grind higher in the short term.

    AGL also rose over the week, with the power company up 1.4 per cent as analysts speculated it could benefit from possible electricity shortages.

    For the broader market, Citi strategist Tony Brennan for one is optimistic. He said that with earnings growth close to trend at around 5 per cent, plus the market dividend yield of 4-5 per cent, equities could still deliver roughly 10 per cent returns which compares well to low rates and yields on other investments.

    “And returns could be higher near term with resource earnings recovering, reflected in our forecast for the S&P/ASX 200 to reach 6,400 by mid-2018, a gain of 12 per cent,” he added. Stock watchSyrah Resources

    Syrah Resources jumped 18.2 per cent over the week. It gained on Friday after the graphite products supplier said that it has signed a binding sales agreement with BTR New Energy Materials. Under the deal, Syrah will supply 30,000 tonnes of graphite from its Balama operation to BTR New Energy. The supply deal covers the first first year of production from the Balama operation. The shares posted their biggest intra-day percentage gain since December last year on Friday and Syrah Resources topped the list of gainers in the Australian benchmark S&P/200 index at one point during the trading day. Syrah CEO Shaun Verner said: “This contract is a significant and material step forward for Syrah. The relationship will see Syrah’s high quality graphite placed into the lithium-ion battery market.” MoversChina trade data

    China’s imports grew 13.3 percent from a year earlier, official data showed on Friday, handily beating analysts’ forecast of 10 percent, after rising 11.0 percent in July. Exports showed some signs of softening, however, with growth cooling to 5.5 percent from a year earlier, roughly in line with analysts’ forecasts for a 6.0 percent increase but down from 7.2 percent in July. The mixed performance left China with a trade surplus of $41.99 billion for August, the lowest since May. Earnings ‘drift’

    Research by Deutsche Bank shows that among top 100 ASX stocks over the past 10 years, companies which beat consensus earnings expectations during reporting season typically outperform the market by 2.5 percentage points over the week after results, and by an additional 3 percentage points over the subsequent six months. Stocks that stand to benefit from this trend now and have a “buy” rating from the broker are Medibank, Oil Search, Santos, Star, and Tatts. Others are Flight Centre, Fortescue, GPT, Orora, and Perpetual. Gold

    Gold prices have hit a fresh one-year high early after the US dollar sagged overnight as traders bought the euro and amid continuing worries around Hurricane Irma and North Korea. Spot gold has added another 0.5 per cent in today’s trade to $US1357.20 per ounce, its highest since September 2016. US president Donald Trump said overnight he would prefer not to use military action against North Korea to counter its nuclear and missile threat but that if he did it would be a “very sad day” for the leadership in Pyongyang. Home loans

    The number of home loan approvals rose 2.9 per cent in July, beating market expectations for an increase of 1 per cent. But the value of total housing finance fell 0.9 per cent to $33.03 billion in the month, seasonally adjusted data from to the Australian Bureau of Statistics showed. The value of loans approved for owner-occupied housing rose 0.9 per cent in July, while the value of loans for investment housing fell 3.9 per cent, compared to June.

    This story Administrator ready to work first appeared on Nanjing Night Net.

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