Global markets were lower on Friday as Wall Street extended its sell-off amid renewed trade fears, capping a week where the benchmark US S&P 500 index and the Nasdaq saw their worst weekly percentage plunges since the market sell-off in December last year.
Last week saw the US Federal Reserve cut interest rates for the first time since 2008 and a renewal of trade war fears following a tweet by US President Donald Trump announcing plans to impose additional tariffs on $US300 billion ($A442 billion) of Chinese imports on September 1. China on Friday vowed to fight back, a move that ended a month-long trade truce
For the week ahead, locally the focus will be on the Reserve Bank of Australia, which is expected to keep interest rates on hold on Tuesday, while the RBNZ makes its interest rate decision on Wednesday. Reporting season in Australia also kicks off this week with a number of Aussie stocks set to make profit announcements.
Stock in Focus: Lynas (LYC:ASX)
Lynas Corp jumped +6% on Friday after Malaysian Prime Minister Mahathir Mohamad indicated the rare earth miner would not have to remove hundreds of thousands of tonnes of low-level radioactive waste from the country to have its processing plant’s license renewed.
In saying that, a weekend report from local publication Malaysiakini revealed the Malaysian cabinet could not agree on a 3-year license extension for the plant and compromised with only a 6-month temporary extension beyond the 2 Sept expiry.
Regulatory risk remains a key consideration when investing in Lynas, and the news flow remains mixed but positive of late. Further, escalation in the trade war between China and US with China retaliating with a potential ban of its exports of rare earths into the US is being seen as a positive for Lynas – given it is the largest producer or rare earths outside of China.
In our view, Lynas provides an attractive investment for those wanting to gain indirect exposure to electric vehicle theme, although it also comes with considerable associated risks.
We currently have a BUY (High-Risk) rating on Lynas.
Australia & New Zealand Market Movers
The Australian market continued to retrace on Friday (ASX 200 index -0.30%) with broad based losses. Gold miners outperformed as the price of gold rose a percentage point to $US1,434 an ounce – its highest level against the greenback since early 2013, and its highest price against the Aussie dollar ever. Rio Tinto shares were lower as the mining giant failed to inspire with its latest set of profit results.
The New Zealand market was once again marginally higher on Friday (NZX 50 index +0.03%) as NZ shares edged higher despite a slide in Asian markets on renewed concerns for the global trade outlook. Contact Energy led the gainers as local investors prepare for upcoming earnings season with a number of Aussie & Kiwi companies reporting profit results in August.
3 Things Markets Will be Watching this Week
- US Corporate earnings season continues this week, with some Australian companies also set to make earnings announcements.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- The Reserve Bank of New Zealand makes its latest interest rate announcement on Wednesday.
Have a Great Day,