Local market jumped on global relief rally on less than expected hurricane damage and no missile test by NK. Local market had already priced in part of this relief rally upside yesterday as we moved on positive US futures…so we had the catch up session today. Given the China/Russia watered down UN sanctions pushed through by US, we should see a bit of sanity…but there is no guarantees with “Krazy Kim”. Let’s hope for all our sake “Tweeting Trump” does not appear in the short term to stir the pot. Hurricane Irma did less damage than expected and has been downgraded…but it’s that time of the year and there is always potential for more. To put limited damage in context…over 6 million residents in Florida are without power. The damage by Harvey will be financially substantial as Houston is the fourth largest city in the US. Everything in the US is big and damage bills are not going to be any difference. Commodities bounced back with the markets, USD and bond yields. We do not see relief rally breaking the recent negative trend. The macro later this week will set the tone….BOE later this week and US Fed next week. RBA continues to be caught behind the debt bubble and slow growth. RBA is unable to react to the global scene while the local government is more concerned about survival than policies. The local economy is facing tough outlook for consumers and that raises the risk that RBA has priced themselves out of the economic cycle. The energy debate is now beyond a joke. AGL is doing what is good for their shareholder and any deal with the government will not deliver lower energy prices…but more likely to lock in even higher consumer prices to cover the cost blow. AUDUSD above 80 cents and looking to go higher as commodities hold up on positive China/EM outlook. We continue to favour miners over financials and industrials for September. We continue to see more upside for base metals and precious metals in a weakening USD outlook in the short term...we like RRL and DCN in Gold; MLX and MOD in Copper; WSA and IGO in Nickel; KDR, PLS and GXY on Lithium; AWC on Aluminium; and S32 as the diversified outside BHP and RIO. China’s comments about moving past fossil fuel cars have put a rocket under Lithium stocks…governments may be stuck in ideological arguments but the customers are moving and so will the market. Stay nimble as September outlook remains weak for markets before the next leg higher. BOEQ Footy Finals picks…updated for week 1 result…just for fun!!!




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Michael Mann

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Mathan Somasundaram

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