The market latched onto an improving dialogue between the US & China overnight ahead of the G20 meeting in Japan next week – President Trump saying that he had talked to President Xi Jinping, confirming the leaders would meet at the G20 plus they would send their respective teams to begin discussions beforehand. This is obviously another positive development for the market, and when combined with the expectations of lower interest rates, it’s easy to comprehend markets testing all-time highs – now just ~200 points away.
However, when I sat down with Steve Jacobs last week he made an interesting point that if trade tensions were not playing out, he doubted that the Fed would be contemplating rate cuts which are now being priced into the bond market. The consensus call is clearly that a trade deal = market higher. However, if markets are focussed on interest rates, a trade deal could ultimately be a market negative given the investors are positioned aggressively for rate cuts. Market reactions are never as a straightforward as one might expect and once again this might prove to be a ''buy the rumour sell the fact'' sort of occasion. Anyway, a very bullish day's trade in Australia with the index closing on its highs, led by Energy stocks.
Overall, the ASX 200 added +78 points or +1.19% to 6648. Dow Futures are trading up +5 points/+0.02%.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE;
Fund managers; caught a bid today as money continues to find its way back into the market. With the local index just a little over 200 points, or ~3% off all-time highs, the fundies have caught a tailwind. FUM has seen significant natural growth so far this year with the market’s rally helping the cause. Platinum (PTM) added 4.79% today, the strongest performer, while Magellan (MFG) added +3.81%, the share price having more than doubled year to date. There is some value in this sector, however momentum is probably more important, and MFG has this in spades.
Magellan (MFG) Chart
Broker moves: Emeco Rated New Buy at Bell Potter Amid Improving Sector Demand - Company as profitable as it has ever been, they say. We own EHL.
· AGL Energy Resumed at Deutsche Bank With Hold
· Mt Gibson Raised to Outperform at Macquarie; Price Target A$1.10
· Afterpay Touch Rated New Add at CIMB; PT A$23.43
· 3P Learning Cut to Equal-weight at Morgan Stanley; PT A$1.10
· PWR Holdings Downgraded to Hold at Bell Potter; PT A$4.85
· Charter Hall Education Rated New Neutral at JPMorgan
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