× Home Modules Articles Videos Life Events Calculators Quiz Jargon Login
☰ Menu

Weekly market update - 11th of March 2019

Written and accurate as at: Mar 11, 2019 Current Stats & Facts

Markets continued to grind higher post-reporting season, although some weakness at the back end of the week saw its gain limited to +0.2% (S&P/ASX 300). A rotation accompanied the weakness into defensives and bond sensitives as economic data prompted some concern over domestic economic growth. As a result, A-REITs gained +1.6% while Resources fell -0.5% and Financials ex-REITS -0.9%.

Slightly softer economic data has seen Australian 10-year government bond rates fall from 2.15% to 2.03% over the month to date. Interestingly, while US 10 year Treasuries are still ~100bps higher than then their lows in Q3 2016, Australian yields have closed to within 15bps, reflecting the worries that people have over the local economy and the view that we are in imminent need of rate cuts. In our view reporting season suggests the underlying economy does have its soft patches but that, in aggregate, it remains in reasonable shape and certainly not as bad as many of the more bearish commentators would have it.

Iron ore prices have fallen 1% over the month to date, pausing for breath after the strong rally of recent weeks. Most fundamentally believe that iron ore miners are in a sweet spot: a softer AUD means that they are receiving in the vicinity of AUD$120 a tonne, while at the same time their cost base is $20 to $30 lower than at its previous peak. This leaves them probably close to peak margins, however, unlike the last cycle where their customers were under pressure from high prices, this time currency and lower costs are playing a more significant role, leaving a more sustainable situation. Fortescue Mining (FMG, +8.7%) continued to outperform over the week, although some of the other mining majors such as Rio Tinto (RIO, -4.6%), BHP (BHP -2.0%) and South32 (S32, -3.3%) lagged.

There was little in terms of company-specific news-flow in the wake of reporting season. Several of the industrial cyclicals which had enjoyed a bounce on decent results save back some of their gains. Seven Group (SVW, -8.6%) was notable in this regard, as was Nine Entertainment (NEC, -4.0%). Both remain strong outperformers over the year to date. The banking relief rally also petered out, with Commonwealth Bank (CBA) down -1.2% and ANZ (ANZ) -2.7%.

JB Hi-Fi (JBH, +7.3%) was among the week’s best performers. Outside of this, it was traditional blue-chip defensives tending to outperform last week with Coca Cola Amatil (CCL, +4.7%), AGL Energy (AGL, +3.7%), Woolworths (WOW, +3.4%), Telstra (TLS, +2.9%), Wesfarmers (WES, +2.3%) and Goodman Group (GMG, +2.0%) leading the pack. We note that this performance is despite lacklustre results and trends in the most recent results for several of these companies.

You may also be interested in...

no related content

Follow us

View Terms and conditions