Weekly wrap: market softens despite digesting a spate of bizarre news
WEEKLY MARKET REPORT
Spare a thought for world share markets which have had to digest a lot of news amid slim volumes and frothy valuations.
Just in one press conference the incoming US President laid out plans to take over the Panama Canal and Greenland without ruling out the use of force, to co-opt Canada as its newest state and unilaterally decide to rename the Gulf of Mexico the Gulf of America.
Fortunately, investors have strong memories of President Trump from his first term so they knew better than to take any of this too seriously.
Here in Australia though it was the overhanging threat of a key US jobs report that forced the ASX 200 lower on the final day of the trading week, reversing earlier gains to fall 0.4% or 35.1 points to close at 8294.1 points.
ASX 200 still up for the week
However, the ASX 200 was still higher for the week, rising 0.5% despite watching S&P 500 futures fall 0.2% over fears of a strong jobs report which might help to moderate the US Fed’s already curtailed future interest rate cuts.
For Australians contemplating some overseas investment or travel, the bad news on the Australian dollar continued with our currency hitting a new two-year low of US61.70¢ overnight on Thursday.
Banks were among the hardest hit by the US jitters although the damage was fairly widespread with ten of the 11 share market sectors falling to end the week.
Banks feel the pain
Westpac (ASX: WBC) shares were hit the hardest, falling 1.7% to $32.60 after Morgan Stanley analysts issued a downgrade.
Commonwealth Bank (ASX: CBA) shares moved in lock step, falling 1.7% to $156.05, NAB (ASX: NAB) dropped 1.1% to $37.95 while Macquarie (ASX: MQG) shares declined by 1.2% to $231.20. ANZ (ASX: ANZ) shares basked in a rare Morgan Stanley upgrade to “equal weight”, with a price target of $27.80.
They obediently dropped towards that mark, falling 0.3% to $29.29.
Miners go it alone
In a rare reversal of the recent history, the other end of the Australian barbell, the big miners, closed higher on the back of stronger iron ore prices in Singapore, which firmed 1% to US$97.40 a tonne.
Rio Tinto (ASX: RIO) shares were up 2.2% to $119.04 while its Pilbara colleagues at BHP (ASX: BHP) enjoyed a 1% share price rise to $39.68.
Waiting for offers
No news was bad news for investors in casino group Star Entertainment (ASX: SGR) with shares down a further 15.8% to just 11c following earlier falls based on a cash crisis at the currently unprofitable company, which is subject to regulatory oversight and has just $79 million in the bank.
Insignia Financial (ASX: IFL) shares rose 2% to $4.12 even after the group denied media reports that Brookfield is considering a bid for the company.
Earlier in the week it received a non-binding $2.9 billion takeover proposal from private equity firm CC Capital Partners after an earlier offer from Bain Capital.
Investors are obviously hopeful that the corporate action might result in a bidding war, adding further value to the wealth manager.
Small cap stock action
The Small Ords index fell 1.49% for the week to close at 3117.0 points.
ASX 200 vs Small Ords
The week ahead
It is Australia’s turn to wait on an employment report this week, with Thursday’s labour force survey likely to show employment growth being flat while the unemployment rate is expected to rise from 3.9% to 4%.
A consensus seems to be growing that Australia’s Reserve Bank will pull the trigger on a rate cut in February due to our relatively feeble economic growth performance.
In the US, an update on consumer, producer and international trade prices is likely to show that core consumer price growth is still running above the US Fed’s 2% goal which is expected to cause the Fed to leave interest rates steady this month.
The major focus on Chinese economic releases will be on fourth quarter economic growth which is expected to hit around 4.9%, quite close to the country’s prediction of hitting 5%.
On the company front the main focus will be on Rio Tinto’s fourth quarter report as well as some of the US banks which are reporting in the coming week.