Weekly wrap: record high market overcomes tariff fears
WEEKLY MARKET REPORT
Fears of fresh tariffs were not enough to hold back the Australian share market which closed at a record high on Friday.
The ASX 200 index closed up 0.2% or 15.8 points to reach the new closing record of 8555.8 points, in the process also overcoming a minor fall for the market leading Commonwealth Bank and a slump by Cochlear.
The rise meant the ASX 200 added an impressive 0.5% during a week that was dominated by fresh fears of a trade war as US President Trump once again showed that when it comes to trade, there is no such thing as an ally.
He even decided to target value added taxes for reciprocal tariffs on trading partners such as Australia’s GST which could result in further tariff pain for Australia despite our close security arrangement with the US and the AUKUS defence arrangements.
The record was made even more impressive by a rally in the Australian dollar which hit a two-month high of US63.28c.
Iron up as cyclone approaches
In mixed news, iron ore prices rose to hit US$108 a tonne after news that a severe cyclone was approaching Australia’s Port Hedland, which is the nation’s biggest iron ore export port, leading to mixed results for the big miners.
Eight of the 11 sectors finished up with consumer staples the strongest sector.
Retailer Woolworths (ASX: WOW) was up a solid 1.8% to $30.79, Coles (ASX: COL) shares were up 1.3% to $19.71 and Treasury Wine Estates (ASX: TWE) jumped 3% to $10.83.
Shares in fellow liquor company Endeavour Group (ASX: EDV) also rose 4% to $4.42.
Gold keeps flying
Gold continued its recent run of records, hitting a new record of US$2932.05 an ounce, with safe haven assets in demand, along with gold mining shares.
One of the big winners was shareholders in gold miner Bellevue Gold (ASX: BGL) jumped 5.4% and was one of the best performed stocks.
Financials went against the winning trend with Commonwealth Bank (ASX: CBA) shares down 0.8% to $165.44 while National Australia Bank (ASX: NAB) shares fell 0.6% to $40.99.
Westpac (ASX: WBC) shares headed the other way, up 0.2% to $34.71 while ANZ (ASX: ANZ) shares also rose 0.2% to $31.29.
Sigma keeps rallying hard
In individual stock news, investors continued to jump on Sigma (ASX: SIG) shares which soared 7.2% to $3.12 on its second day of trading as a merged company after taking over Chemist Warehouse.
The merged company is now the 22nd biggest share on the Australian stock exchange.
Origin (ASX: ORG) shares also rallied on solid profit results, up 1.8% to $10.32.
While miners were mixed, healthcare stocks were dragged down by Cochlear (ASX: COH) shares which slumped 13.7% to a 15-month low of $262.73 after the hearing implant maker released disappointing half-year financial results.
AMP (ASX: AMP) shares fell 14.9% to $1.49 after the financial group halved its dividend and warned that dividend income was set to remain low to support the company’s growth.
Small cap stock action
The Small Ords index edged 0.19% higher for the week to 3235.1 points.
ASX 200 vs Small Ords
The week ahead
Without question the burning question for the coming week is what the Reserve Bank decides on Tuesday.
Unlike most decisions, this one is a real turning point being the start of the cutting cycle and unsurprisingly economists are split of whether the RBA will start the cutting process or wait it out while the share market rates the chances of a cut as around 80%.
Adding to the confusion is that getting a read on the trends for inflation is quite difficult.
Some economists point to the current inflation numbers, including the RBA’s most watched figure the annual trimmed mean of 3.2%, as showing a clear trend of falling inflation which is now running within the RBA’s target range.
Is inflation really falling?
On the other hand, some point to unusual external factors like the government’s energy rebates as artificially pushing inflation below where it should be and disguising the persistence of price rises.
With the majority barracking for a cut, that will increase the chances of significant market disappointment if a cut doesn’t eventuate which is why this particular decision is so clearly a focus for the week.
The secondary issue, of course, is whether the RBA board’s commentary on the decision which may give some idea about how likely further cuts are and what the timing might be or what hurdles need to be cleared before further cuts are considered.
Other local announcements to watch out for this week include the Australian Bureau of Statistics monthly employment report on Thursday, which will include job creation numbers and the unemployment rate.
Retail sales numbers will show how the Australian consumer is holding up in the face of the rising cost of living.
Looking offshore, Chinese trade data on Friday will be pivotal, with any positive trends likely to boost the prices of commodities and mining stocks, while US quarterly profit results are winding down this week while the Australian profit season continues.