The Monday Report

Daily Market Reports | Feb 11 2019

By Greg Peel


It was no great surprise that on a Friday at the end of a stellar week for the ASX200 some profit-taking would emerge. On lower volume, the index dropped back -0.3% but still managed to close up 3.5% for the week.

The three big themes of the week were the Royal Commission, iron ore and the RBA. The RC report kicked things off on Tuesday and sent bank shares soaring. Friday’s session was mixed, with buying in Commonwealth Bank ((CBA)) ahead of its dividend offsetting selling in National Bank ((NAB)) in the wake of its management crisis. Financials closed down -0.1%.

The iron ore price flew to moon last week due to Vale’s forced production shutdowns and indeed rose another 4% on Friday to be closing in on US$100/t. The Chinese are back today so it will be interesting to see how they react. Local iron ore stocks enjoyed the rise all week, particularly pure-play Fortescue ((FMG)), but profit-taking was the order of Friday as materials fell -1.3%.

Oil prices have also been strong of late, and thus oil & gas stocks, but a dip in the oil price on Thursday night sparked a similar profit-taking stampede, with the energy sector down -2.6% and Beach Energy ((BPT)) alone down -10%.

The RBA made no change to its cash rate on Tuesday and the governor announced on Wednesday the central bank has shifted to a neutral stance. Economist consensus is now that the next move will be down. The RBA’s Statement on Monetary Policy, released on Friday, featured a cut in 2019 GDP forecast to 2.5% from 3.25% and in inflation to 1.25% from 2%. These are substantial moves.

Reason? Housing market weakness. The Aussie fell out of bed once more and is back under 71, down -0.3%.

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