Weekly market review
Written and accurate as at: Oct 16, 2017 Current Stats & Facts
The S&P/ASX 300 gained +1.3% in a good week for Australian equities. The index has remained range bound over the last five months and last week’s move returns the market to the top end of that range. We are in the early part of the AGM season and, broadly speaking, messages from management are positive and suggest the economic backdrop is generally supportive of earnings.
Resources were the only major segment of the market to lose ground, with iron ore falling in the first half of the week, before staging a bounce over the last few days. All eyes remain on China’s National Party Congress this week, which will reveal the composition of key leadership positions which may ultimately have implications for the country’s policy settings as it continues to balance between growth and reform. Chinese steel import data ticked higher last week, which suggests its domestic production continues to reduce. There is some speculation the winter production shutdowns, which normally begin November, may have accelerated this year. The iron ore miners all lost ground: BHP (BHP) fell -0.8%, while Rio Tinto (RIO) (-1.4%) and Fortescue Metals (FMG) (-2.6%) were even weaker. Elsewhere in the sector, Whitehaven Coal (WHC) was off -2.1%, while South32 (S32) (-1.2%) downgraded production guidance for its Appin coal mine in the Illawarra, as it eases it back into service following a safety-related shutdown.
Several REITs were flat-to-down for the week, with Dexus (DSX) falling -1.2% while Investa Office Fund (IOF) (-0.5%) and Vicinity Centres (VCX) (0.0%) also underperformed. This was despite yet another weak inflation print in the US contributing to a small fall in bond yields. The bond market continues to defy the predictions of a rout as the Fed looks to increase rates and the consensus view that rates remain low is supportive of the market overall.
Generally speaking, the more cyclical and growth parts of the market led last week’s rally. Dominos Pizza (DMP) (+8.9%) was among the market’s strongest stocks following an investor day the previous week, which focused on growth opportunities over the next few years. Navitas (NVT) (+6.8%) was another outperformer, with little news beyond the fact that its CFO will become the CEO.
Accommodation group Mantra (MTR) (+3.2%) continued to gain ground as the board recommended Accor’s takeover bid to shareholders. Nine Entertainment (NEC), gained +8.7%, bouncing back from a slide over the previous weeks as ratings revealed it was winning share, helped by the success of The Block. Aristocrat Leisure (ALL) was up +5.1% as the annual Global Gaming Expo in Las Vegas suggested it retains its significant advantage over competitors in terms of product. Meanwhile, the Chinese steel import data helped Bluescope Steel (BSL) increase +4.9%. Its AGM also reassured investors wary of further downgrades as a result of US steel spreads contracting.