“In the next week or so, the Fed’s FOMC meeting will be key in driving sentiment, especially its update in economic projection and any indication of tapering, or even ending, its balance sheet reduction later this year.”
The major miners were mixed this week. BHP Group fell 1.1 per cent to $36.48 this week, Rio Tinto advanced 1.2 per cent to $91.65, South32 climbed 0.8 per cent to $3.81 and Fortescue Metals Group closed at $6.48, down 0.3 per cent for the week.
Gold miners also supported the market’s advance this week as investors hedged amid uncertainty over the future of Brexit and the trade war. Newcrest Mining climbed 0.9 per cent this week to close at $24.72, Evolution Mining rose 4.6 per cent to 3.65, St Barbara advanced 7.9 per cent to $4.50, and Saracen Minerals closed the week 8.6 per cent higher at $2.79.
Kogan.com shares closed 6.5 per cent lower at $3.74 despite its shares soaring on Thursday after announcing the launch of Kogan Marketplace in a bid to compete with Amazon, eBay and Catch Group. The new platform will allow third-party traders, including Microsoft, Breville, Lego, Fisher-Price, Paw Patrol, SodaStream, Gillette, Gucci and Philips, to sell products through the platform.
The major financial stocks led the losses on the local sharemarket. ANZ shares fell 2.8 per cent to $26.35 this week, Westpac closed 1.9 per cent lower at $26.48, NAB slid 0.7 per cent to $25.21, Commonwealth Bank declined 1.2 per cent to $72.31 and Macquarie closed at $127.74, down 0.6 per cent.
Sigma Healthcare shares fell 14.6 per cent to 52.5¢ this week after the company knocked back a takeover offer from rival Australian Pharmaceutical Industries. Sigma boss Mark Hooper said the company would have to significantly boost its $730 million cash-and-scrip offer.
Morgan Stanley downgraded its rating and price target on ANZ Bank, citing a range of issues facing the bank. The broker said revenue pressure was growing, ongoing positive cost surprised looked unlikely, de-risking was largely complete, capital management options were reduced, return on equity was not recovering and their share price was vulnerable to earnings downgrades. “While ANZ’s business mix should provide more scope than peers’ to adapt to an increasingly difficult operating and regulatory environment, we believe it currently faces execution challenges in Australian retail and business banking, with housing loan growth and deposit growth below system,” analyst Richard Wiles said. The broker downgraded its rating to “underweight” and reduced its price target from $26 to $25.
What moved the market
European shares have been firmly outperforming UK shares for the past month as concerns over the future of Brexit leaves British investors trading with more caution. Since the middle of February, the EURO STOXX 50 index has risen firmly, hitting a five-month high on Thursday, while the FTSE 100 has actually fallen over the same period. The last month represents the biggest divergence between the two indices in the past six months. The underperformance of the FTSE 100 could be in part due to the fact sterling has performed much better against the US dollar than the euro has.
The recent weakness in gold could present a strong buying opportunity for investors if they’re willing to ride out some short-term pain, according to strategists. “We view the recent downtick as a buying opportunity for those looking to make medium-to longer-term gold allocations,” RBC Capital Markets commodity strategist Christopher Louney said. “That is not to rule out any additional near-term pain as a strong dollar continues to cap gains, but we think that price risk is skewed to the upside not only in 2019, but likely in 2020 as well.” The price of gold has fallen more than 3 per cent in the last month and is now trading at $US1297.05 an ounce.
The British pound traded with volatility on Thursday and Friday as a series of crucial votes in the British parliament left the future of Brexit under a cloud of uncertainty. On Friday morning, Sydney time, UK parliament voted to extend its deadline to leave the European Union, however, an extension remains contingent on the agreement of all 27 EU member states. Parliament also chose to reject a second referendum after Opposition Leader Jeremy Corbyn ordered his MPs not to vote on the amendment on the ground that it was the wrong time to push for it. Prime Minister Theresa May could also attempt for a third time to get her deal through parliament next week.
Iron ore prices surged on Thursday on hopes of increased demand for the bulk metal. The price of 62 per cent iron ore rose 3.6 per cent to $US87.10, rebounding from a weaker start to the week. “Falling stockpiles drove optimism that China’s steel production need sot lift further,” CBA mining and energy commodities analyst Vivek Dhar said in a note on Friday. “Demand was further supported after Chinese policymakers relaxed restrictions on sintering output int he steel-making hub of Tangshan. We expect iron ore prices will spike its the $US90s as supply concerns mount.”
William is a UTS journalism graduate and has worked at The Sydney Morning Herald. He now covers markets at The Australian Financial Review and keeps a close eye on IPOs.