Global markets were little changed overnight, helped by upbeat US housing data and a gain for bank stocks driven by rising Treasury yields, while the tech-heavy Nasdaq was weighed by a drop in Microsoft.
Investors shrugged off US-China trade-war risks and Chinese Premier Li Keqiang downplayed trade-war risks and tensions. US President Donald Trump's 10 percent tariff on US$200 billion of Chinese goods and the subsequent retaliation were more moderate than investors had anticipated.
Base metal prices lifted across board yesterday on the back of more positive trade sentiment as China remained muted in its immediate response to the latest round of tariffs. That lifted sentiment for the local ASX miners, who led the Australian market. The price of gold however has been in a downtrend, which we discuss below.
Stock in Focus: Gold
For a change, we thought we would focus on the gold price today rather than a stock, given client interest around the moves in gold of late.
Given global uncertainty around a potential trade war, and emerging market turmoil in the likes of Turkey, the price of gold has somewhat surprisingly remained depressed.
Our view has been bearish on the gold price for some time now. We think the recent strength in the US dollar continues to be a main driver of gold prices, putting pressure on the commodity as the gold price is usually denominated in USD terms. Going forward we see continued pressure on the price of gold as interest rates in the US rise (which increases the opportunity cost of buying and holding gold – as gold is an asset that does not generate an income).
Australia & New Zealand Market Movers
The Australian share market rallied yesterday (ASX 200 index +0.46%) amid more positive trade headlines as the major banks and miners lifted the market to its highest close in two weeks. Westpac shares advanced after the bank slashed its lending rates by up to 110 basis points in a bid to attract new borrowers. It came on the same day the bank upped its standard variable rates for existing customers by 14 basis points. Fresh fruit and vegetables business Costa Group advanced +5% after a major broker upgraded Costa to a 'buy', saying that the company could beat its 2019 financial year double-digit growth guidance if it had a strong second-half performance.
The New Zealand market continued to move higher on Wednesday (NZX 50 index +0.48%) as NZ stocks joined a global rally as the latest bout in the US-China trade war wasn't as harsh as feared. In stock news, Synalit Milk’s nearly doubled its annual profit to $74.6 million as the milk processor lifted sales of its high-value dairy products. However, the share price fell -6.6% due to chief executive Leon Clement playing down the outlook, saying infant formula sales will probably grow at a slower pace.
3 Things Markets Will be Watching this Week
1. Trade is expected to be a keen focus this week as Trump directed advisers to proceed with plans to impose tariffs on $US200 billion of Chinese goods even as the US opened the door to further talks with China.
2. Minutes from the last RBA meeting are published on Tuesday.
3. NZ economic growth (GDP) data is released on Thursday.
Have a Great Day,
Team
