Daily Market Insights
Global markets started the week on a mixed note overnight. Stocks on Wall Street dipped as a fall in Apple shares offset gains in the energy sector.
Closer to home, the weekend’s positive global investor sentiment wasn’t enough to lift the ASX yesterday, while the NZX was closed for Queens Birthday Holiday. The focus of investors locally will be on the Reserve Bank of Australia’s interest rate announcement this afternoon. We expect no change from the RBA today, although the outlook comments will be key in terms of the expected interest rate track for the remainder of the year.
Oil was in the headlines again as its price continues to swing up & down. Tensions are high in the Middle East as four Arab countries led by Saudi Arabia cut diplomatic ties with Qatar and moved to close off access to the Gulf country, escalating a crisis that started over its relationship with Iran and its support of the Muslim Brotherhood.
Heightened geopolitical tension across key OPEC nations (such as Saudi Arabia, Iran and Iraq) is usually a positive for the oil price – and there is not much geopolitical risk being factored into the oil price currently. However, it is also possible that a rift between Qatar and several key Gulf Arab nations could impact OPECs plans to curb oil production.
Stock in Focus: Woodside Petroleumn (WPL.AX)
As we have discussed in the past, there have been a number of positive developments for the oil industry since the turmoil experienced in early 2016, including OPEC’s dramatic change of stance to curb oil output. However, our view has been that prices will cap out at around the $50-$60 level in the near term primarily due to the impact of US shale gas producers increasing production. As a result, we bought selected ASX oil exposures in April 2016 – namely Woodside Petroleum (WPL.AX) has been our top ASX energy play.
We are currently BUY rated on WPL shares as our top ASX energy pick.
Members should look out for our full update on WPL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market started the week with losses (ASX 200 index -0.57%) as the major banks and miners continued to come under selling pressure. While most sectors were down, Gold stocks were among the day’s best performers as the Gold price hit its highest level in 6 weeks.
MGC Pharmaceuticals Ltd saw its shares jump yesterday as the medicinal cannabis company emerged from a trading halt. MGC announced it has signed an agreement with the Biotechnical Faculty of the University of Ljubljana in Slovenia to begin a three-year comprehensive botanical research program which management believe will create critical new genetic intellectual property. Medicinal cannabis stocks have quite been a popular trend of late, however we would express caution. At this stage, it is near impossible to know which company will come out with the winning product or whether the product will then be accepted by enough prescribing physicians to generate sufficient sales to make it a viable business.
The New Zealand market was closed for Queens Birthday holiday
3 Things Markets Will be Watching this Week
1. Whether market continues to trend higher, with the US market continuing to reach new all-time highs.
2. Australian quarterly economic growth (GDP) figures are released on Wednesday.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday
Have a Great Day,
Team