ASX at the close

Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets

Oil rallies on Yemen conflict

Equities have mostly unwound in Asia with a variety of factors pushing investors into cautious mode. The escalation of the situation in Yemen with Saudi Arabia launching airstrikes has the world on high alert and leaders will no doubt be holding talks to try and find a swift resolution and prevent deeper regional conflict. Predictably, this has had an impact on crude prices with WTI and Brent on the move in Asia, putting on more than 5%. WTI was trading at around $49/bbl at the beginning of Asian trade and is now testing $52/bbl. Meanwhile, Brent has appreciated from around $56.50/bbl to $59.50. The fact that OPEC’s largest oil producer (Saudi Arabia) is involved in a conflict is always going to have a significant bearing on oil prices. Consequently, equities have extended losses which had emanated from weakness in European and US trade. Concerns around Greece saw its yields spike and this weighed on equities. There were also reports the ECB will raise the Greece ELA cap by €1.1 billion at the end of the session. Meanwhile, Greece supposedly has until Monday to detail reform commitments. Additionally, US durable goods orders disappointed and that put US equities on the back foot.

Inflation could be back in focus

Given inflation has been a big talking point for global policymakers recently, it’ll be interesting to see whether oil prices can extend and sustain these gains. This will see energy prices start to rise again and buoy inflation. The worst possible situation will be if inflation picks up but global growth doesn’t. This would limit the room policymakers have to ease in order to support growth. There haven’t been any big fx moves just yet but there are already some safe haven flows into the yen. USD/JPY has slipped and is on the verge of dropping to late February lows. In turn this has weighed on Japanese equities as the Nikkei is underperforming the region. USD/JPY has broken an uptrend support line which has been in place since January and it just seems the pressure could mount in the near term. We have a raft of releases out of Japan tomorrow including household spending, CPI, unemployment rate and retail sales. At the same time out of China we have industrial profits data tomorrow which is likely to show a further decline. This makes for an exciting finish to the week for the region considering how quiet the middle part of the week has been for us.

ASX 200 underperforming

Interestingly China has actually rallied today on a day when equities around the region are struggling. The ASX 200 slipped below 5900 for the first time in a week as investors grow increasingly wary that we can nudge through 6000. Investors were quite happy to hold on to positions early in the week hoping we’d have enough catalysts to finally break through the 6000 barrier. However, given this hasn’t happened and a few risk factors are coming into the market then some investors are happy to take profits off the table. Having said that, I still feel there is plenty of value on the dips, particularly in the yield plays, and the smart money will be looking to take advantage of that. The iron ore saga continues with Rio Tinto’s CEO Sam Walsh today making comments around the Andrew Forest suggested production cap. Perhaps this highlights how out of line Mr Forest was in his suggestion. Regardless, FMG has outperformed the mining space today with a gain of nearly 3%.

Weaker open for Europe

Ahead of the European open, we are calling the major bourses weaker with the key data points being the GfK German consumer climate and European credit aggregates (private loans and money supply). In the UK, we have February retail sales on the docket. On the currency side, the euro has seen signs of life of late, albeit on reasonable short-covering. The single currency will be particularly interesting should we continue to see Greek bond yields rising in the near term and risk aversion ramping up. This could see the currency unwind after its recent resilience.

Comments

  1. http://www.watoday.com.au/digital-life/digital-life-news/no-limits-rights-holders-could-potentially-block-hundreds-of-piracy-websites-in-australia-with-a-single-strike-20150326-1m3y6c.html

    “Movie, music and TV rights holders will be able to request judges block an unlimited number of overseas websites facilitating online piracy in the one court case under the Abbott government’s website-blocking legislation, due to be introduce into parliament on Thursday, Fairfax Media has learned.”

    • OzStaya looking more like dictatorship regime by the day. What do they say? If you don’t love it leave.

      I’ll be packing my bags soon enough.

  2. What had happened to MSB?

    SRX….. I think SRX will go lower than 14.8 with thin volumes.

    • MSB. This may be a stupid question but is it because the signing of that stupid TPP would work against it? Give a free run to US biotech.

      Just thinking out loud.

      SHARMA GONE!! 3 down…

    • Oh this is gold and so Straya right now

      “If Mr Baird held any fears that by selling his former home he might be priced out of Sydney real estate, the investment purchase may have been viewed as an ideal way to secure a toe-hold in the market.”

      Shit – two weeks out of the market – lucky they didn’t miss the boat.

      “The Bairds sold their Fairlight home on Edwin Street last April for $1.95 million, having owned it since 2007 when they bought it for $1.2 million.”

      Obviously investment genius (6% per annum pre-costs)

      “It was an opportune year in which to sell. Domain Group data shows Fairlight’s median house price rose 13.9 per cent last year”

      Wow

      Seriously – this is all creepy shit masked as ‘journalism’

      Last week the front pages of Fairfax online had the home sales of a dead Prime Minister and a murder victim as ‘news’

      This sicko shit is reaching full retard.

      How’s Mrs Baird’s super going? Her options account? Does she have term a deposit?

      Like I give a firetruck…

      • Nassim Taleb, Antifragility (p 126), he wrote:

        Assume further that for what you are observing, at a yearly frequency, the ratio of signal to noise is about one to one (half noise, half signal)—this means that about half the changes are real improvements or degradations, the other half come from randomness. This ratio is what you get from yearly observations. But if you look at the very same data on a daily basis, the composition would change to 95 percent noise, 5 percent signal. And if you observe data on an hourly basis, as people immersed in the news and market price variations do, the split becomes 99.5 percent noise to 0.5 percent signal.

        That’s the current state of news produced by Domain. 99.5 percent noise to 0.5 percent signal. Retarded is an understatement. Deranged is more like it. But again, it wasn’t too long ago when the Dutch people were consumed by their Tulips and I’m sure that’s all they talked about at the time. Humans do not change that easily. It’s all happening as expected.

  3. Stuck With a House That Can’t Be Sold – Yahoo Finance

    http://finance.yahoo.com/news/stuck-house-cant-sold-115000767.html

    When you ask 29-year-old Anthony Walker about the home he owns, his response is a chorus of resigned sighs. It’s not quite the reaction you’d expect from one of the few in his generation who has managed to achieve homeowner status. But the property Walker co-owns with a good friend and former roommate is deeply underwater. That means that since he purchased the property, the value has slipped so much that the house is worth less than total mortgage debt taken out to buy it. As time passes, he’s growing increasingly doubtful that he’ll ever see the property value back in the black. … read more via hyperlink above …

  4. Slowing Chinese Economy Hits Profits of Two Big State Banks – WSJ … google search title if blocked …

    http://www.wsj.com/articles/slowing-chinese-economy-hits-profits-of-two-big-state-banks-1427372707

    BEIJING—Two more big Chinese banks reported sluggish profits for last year as the cooling Chinese economy took its toll on profitability and bad loans piled up, underscoring concerns over the health of the nation’s banking sector. … read more via hyperlink above …

  5. Sorry for the delay Funky….

    Day three in the @UptownFunk = Bull v @Stomper = Bear challenge

    Continuing softness in RIO and a 1.06% fall in BHP widens the spread in favour of The Bear..

    FMG (aka CartelCo) has strengthened since kick-off but the big question is whether this dog will still have a pulse in 87 days time.

    23/03/2015 27/03/2015 Mvt %
    BHP $31.00 $30.78 -$0.22 -0.71%
    RIO $58.21 $56.500 -$1.71 -2.94%
    FMG $1.98 $2.120 $0.14 7.07%
    Average $30.40 $29.80 -$0.60 -1.96%

    (On a proportional basis the Bull would have been ahead by 1.14%)