Global markets continued to rally overnight with US markets hitting fresh highs, although trading was muted ahead of the US Independence Day holiday.
Locally, it was a quiet day on the stock news front, as investors are waiting for earnings season in August for a steer on where companies with June and December balance dates are tracking.
Stock in Focus: Gold
The price of gold has rallied strongly this year, and is at 6-year highs. Gold is usually seen as a hedge against inflation or as portfolio insurance in times of uncertainty. Given there is a lack of global inflation, there is an argument that concerns over global growth have pushed investors towards safe-haven assets
In the past we have discussed how the price of gold is inversely correlated to real interest rates in the US (as US cash is essentially the cost of holding gold). Last year we expected that global interest rates were moving higher and hence were negative on gold – this rate view has now flipped dramatically. Given the return on cash has moved lower in the US this year, this helps drive investment into gold, while the US dollar has also weakened lately which is also driving the price of US dollar gold higher.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.49%) as lower interest rates and falling bond yields lured investors to the local equity market. The big miners were firmer on Wednesday as the price of iron ore continued to test five-year highs. Gold miners were also firmer after the price of the precious metal hit a fresh six-year high.
Woolworths led the market gains on Wednesday after it announced it would combine Endeavour Drinks and ALH Group (one of the biggest pokies businesses in Australia) into a $10 billion business and spin them off through a demerger, initial public offering or trade sale. The merger is expected to be completed this year, with the subsequent demerger scheduled for 2020 creating a standalone drinks & hotels business.
The New Zealand market was in the green on Wednesday (NZX 50 index +0.12%) in light trading ahead of the US Independence Day holiday, with exporters Kathmandu Holdings and A2 Milk leading the market higher. Shares of Pushpay Holdings were put into trading halt to allow founder and former chief executive Chris Heaslip to sell down part of his stake.
3 Things Markets Will be Watching this Week
- Trade related news flow is likely to remain in the headlines.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- Friday's US nonfarm payrolls (employment figures) will be the key event in terms of economic data.
Have a Great Day,