Mixed commodity picture leaving local market subdued

Tristan K'Nell

The Australian Share market looking at ending the day with a positive gain, with the market pushing higher after losing its way around midday. Overnight a flat overnight lead from Wall Street and continued volatility from commodity markets combining for another subdued start to the session. As expected overnight we had the Fed Reserve leaving rates on hold, with the Fed sighting risks to the economy subsiding, the labor market getting better and near term risks diminishing. The central bank not really telling us anything we didn’t already know. I can’t see a rate hike before December given the presidential election in November. I still believe the Fed see way too much risk and will continue to take a conservative approach to raising rates. The strength of the U.S dollar will be a major determinant as will a consistent performance across the economy. The local market was actually the only market tracking higher in the region, with the Nikkei & Shanghai Composite all trading lower. Market Turnover heading into the final hour of trade was $2.972 billion

another low turnover session and one of my main concerns for whole month of July. While we have seen the market bounce back after Brexit there has been a genuine lack of conviction. Ahead of reporting season with a number of uncertainties still plaguing us worldwide proceed with caution in August.

Around the market, energy stocks continuing to feel the brunt of crude’s volatility and are an area of major uncertainty moving forward. Crude again overnight, WTI down 2.3% & Brent 3.34% with analyst price targets being slashed and concern mostly mounting on over supply with data again continuing to be very poor. Crude could easily fall under $40 in the coming week. Today local miners feeling the pressure Beach Energy (-3.31%), Origin (-2.58%), Oil Search (-0.84%), Santos (-1.86%) and Woodside (-0.17%) all in the red.

Holding the market up was the resource sector continuing its big bounce from yesterday with another solid day of trade. Fortescue receiving several broker upgrades to compliment a pleasing production update yesterday. The majors BHP (+1.08%) and Rio Tinto (+2.48%) also profiting from spot Iron ore bouncing higher and there ADR’s trading higher on overseas exchanges. There were also reports that BHP will charge up to $1.3 billion to cover the costs of the dam disaster at the Samarco iron ore mine in Brazil from last November.

Also pushing higher were the gold stocks after some underperforming in the recent week. Newcrest (+4.41%), Northern Star (+8.07%) and St Barbara (+6.84%) making some good gains.

The financials were a mixed bag with the only outperforming being Macquarie Group with the investment bank expecting profit to be broadly in line with its record $2.06 billion profit from last year with Asset Management, Corporate & Asset Finance performing strongly. A standard but consistent update from the investment bank well on track to match last year’s result but like the other big banks in the sector still face over issues over tighter regulation ahead. Macquarie (+1.17%) but well off morning highs as were the others. It will be interesting to track the banks ahead of the RBA decision next Tuesday.


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